Mortgage Rates Forecast for 2025: Experts Weigh in on Potential Drops

Mortgage Rates Forecast for 2025: Mortgage rates have seen significant fluctuations over the past year, leaving potential homebuyers and refinancers wondering about their next move. With rates currently hovering in the upper-6% range, market watchers are closely monitoring Federal Reserve actions, economic trends, and inflation data for signals of relief. Here’s a fresh perspective on what experts predict for mortgage rates in 2025 and beyond, and what it means for buyers and homeowners.

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Recent Mortgage Trends: A Snapshot

In November 2024, the average 30-year fixed mortgage rate stood at 6.78%, reflecting a modest dip from 2023 but still a far cry from the record lows of 2020 and 2021. Despite a series of Federal Reserve rate cuts aimed at stimulating the economy, mortgage rates remain stubbornly high compared to pre-pandemic levels.

While the Fed has signaled more rate reductions ahead, the full impact on mortgage rates may take time to materialize. Housing experts caution that while mortgage rates may gradually decline, significant drops are unlikely in the short term.

What the Experts Predict for Mortgage Rates in 2025

1. LoanDepot: A Sub-6% Possibility

Jeff DerGurahian, chief investment officer at LoanDepot, anticipates that by late 2025, mortgage rates could dip to the high-5% to low-6% range. He attributes this optimism to an expected series of Fed rate cuts, which could collectively bring mortgage rates down by 75–100 basis points.

2. BrightMLS: Slow but Steady Decline

Lisa Sturtevant, chief economist at BrightMLS, predicts rates will remain above 6% for most of 2025. However, she expects gradual declines, offering some relief to buyers and sellers who have been navigating higher borrowing costs.

3. Fannie Mae: A More Optimistic Outlook

Fannie Mae forecasts the 30-year fixed mortgage rate will average 5.7% by mid-2025. The agency believes inflationary pressures will ease, allowing for further rate cuts and an overall decline in borrowing costs.

4. Freddie Mac: Stability with Gradual Easing

Freddie Mac projects that rates will remain above 6% into early 2025, though they should ease gradually over time. Chief Economist Sam Khater notes that volatility in economic data could still lead to temporary rate spikes.

5. Mortgage Bankers Association (MBA): Modest Reduction Expected

According to the MBA, the 30-year fixed mortgage rate will likely average 6.0% in the second quarter of 2025, reflecting a steady downward trend but not a dramatic drop.

Factors Driving Mortgage Rate Changes

Federal Reserve Actions

The Fed’s recent policy shifts, including multiple interest rate cuts in late 2024, have set the stage for a potential easing in mortgage rates. However, experts agree that the central bank’s approach will remain cautious to avoid reigniting inflation.

Economic Conditions

A cooling job market and slower wage growth could prompt the Fed to continue cutting rates, indirectly lowering mortgage costs. However, resilient economic data might keep rates elevated longer than expected.

Housing Market Dynamics

Tight inventory and high home prices continue to weigh on affordability. Even with slightly lower rates, many buyers could remain priced out unless home prices stabilize or decline.

Should You Buy or Refinance in 2025?

For Buyers:

Waiting for rates to fall further can be risky, as the housing market is influenced by more than just mortgage rates. If you find a home you love and can afford the payments, locking in a rate now could be a wise decision.

For Refinancers:

Refinancing in 2025 could make sense if your current rate is 7% or higher. Those with rates below 6.5% might benefit from waiting until rates drop further, potentially to the mid-5% range by mid-2025.

Tips for Securing the Best Mortgage Rate

Monitor Rates Closely: Mortgage rates fluctuate daily. Stay informed to lock in a favorable rate when the opportunity arises.
Boost Your Credit Score: A higher credit score can help you qualify for better rates. Check your credit report for errors and work to improve your score.
Shop Around: Compare offers from multiple lenders to ensure you’re getting the best deal. Even small differences in rates can save thousands over the life of your loan.
Consider Points and Terms: Buying discount points or opting for a shorter loan term can help reduce your rate and overall interest costs.

The Bottom Line on Mortgage Rates in 2025

While experts anticipate gradual declines in mortgage rates through 2025, they caution against expecting a return to the ultra-low rates of recent years. The forecast remains optimistic for buyers and refinancers seeking relief from today’s higher costs, but patience and preparation will be key.

Whether you’re planning to buy a home or refinance an existing mortgage, understanding the market and exploring your options will put you in the best position to succeed.