Before diving into the predictions for 2025, let’s take a moment to look back at what experts were forecasting for 2024 around this time last year. Most major predictions expected rates to fall. SPOILER: They were wrong. While some anticipated that we would see rates below 6% heading into the new year, the average rate for a 30-year fixed-rate mortgage is currently 7.37%.
Does this mean reading the rest of this blog post is a waste of time? Honestly, the answer is probably yes. But before you click away, let me highlight the bigger takeaway from these prediction models: if the smartest, highest-paid, and most "in-the-know" experts routinely get these guesses wrong, the idea that your real estate agent has any special insight is laughable. If your realtor claims to know exactly what will happen with rates in 2025, it might be time to find a new one. Rant over.
Will Mortgage Rates Go Down in 2025?
Quick Answer: Mortgage rates in 2025 are anticipated to decline modestly compared to 2024 levels; however, they are expected to remain above 6%.
What The Experts Are Saying About 2025 Mortgage Rates
DISCLAIMER: No one can predict the future with certainty, so take any forecast with a huge grain of salt. Like the ones that hit your windshield after shooting out of a snowplow on 590. You shouldn't build your real estate decisions around these numbers. Now that we’ve got that out of the way...
Mortgage Bankers Association (MBA) | Stay Above 6.3%
"With an incoming Trump administration and Republican control of the House and Senate, our November forecast reflects faster economic growth, somewhat higher inflation, and larger deficits than the October forecast, all of which leads to a higher path for rates." – MBA economists Mike Fratantoni and Joel Kan
Fannie Mae: Rates Will Average 6.4% in 2025 and 6.1% in 2026
"From an affordability perspective, we think 2025 will look a lot like 2024, with mortgage rates above 6%, home price growth easing from recent highs but staying positive, and supply remaining below pre-pandemic levels. Still, heightened mortgage rate volatility may present opportunities for would-be homebuyers to take advantage of temporary lows, and we may see stretches where housing activity is boosted by lower rates — but, on average, we expect mortgage rates to remain elevated and a hindrance to activity." – Mark Palim, Fannie Mae's senior vice president and chief economist
National Association of Home Builders (NAHB) : Average 6.36% in 2025 and 5.93% in 2026
"The 2024 election result has put inflation back in the spotlight and brought new risk to the economic outlook. Proposed tax cuts and tariffs could increase inflationary pressures, suggesting interest rates may decrease more slowly." – NAHB senior economist Fan-Yu Kuo
Wells Fargo: Rates Will Average 6.41% in 2025 and 6.34% in 2026
"Incoming inflation data likely warrant further Fed easing, but at a slower pace. Although new tariffs would trigger a temporary reacceleration in inflation, we suspect that the FOMC will disregard the inflationary bump and more heavily prioritize the tariff-driven hit to GDP and job growth." – The Economics Group of Wells Fargo Bank
Realtor.com: Rates Will Average 6.3% in 2025
"Our forecast for mortgage rates has been adjusted upward to reflect a combination of stronger economic growth, more fiscal spending, and higher prices/inflation (because of more tariffs and lower taxes) under a Trump administration and Republican Congress." – Realtor.com Economic Research
Why are mortgage rates high?
At the heart of mortgage rate determination lies the ebb and flow of the economy. Several key economic indicators play a pivotal role in influencing mortgage rates:
Federal Reserve Policy: The Federal Reserve, through its monetary policy decisions, primarily sets the tone for mortgage rates. Changes in the federal funds rate, which is the interest rate at which banks lend money to each other overnight, can have a ripple effect on mortgage rates. When the Fed raises rates to curb inflation, mortgage rates tend to follow suit, and vice versa.
Inflation: Mortgage rates and inflation share an intricate dance. Lenders factor in inflation expectations when setting mortgage rates. Inflation erodes the purchasing power of future dollars, so lenders typically demand higher interest rates to compensate for this loss.
Bond Market Movements: Mortgage-backed securities (MBS), which are bundles of mortgages sold to investors, are closely tied to the bond market. When bond prices rise, yields fall, leading to lower mortgage rates, and conversely, when bond prices fall, mortgage rates rise.
What to expect with inflation in 2025
In short, nobody really has any idea what is going to happen this year with inflation. Wall Street banks outlook for how the Federal Reserve will adjust interest rates in 2025 they range all the way from heavy-handed to hands-off.
For example, Citi is anticipating five rate cuts in 2025 and Bank of America is forecasting no rate cuts at all.
What does this mean for you as a home buyer? I would recommend keeping a close eye on your budget this year and making sure to save as much as you can to go toward your down payment or buying down your rate. Also, boosting your credit score is never a bad idea in any economy.
