What will mortgage interest rates be in 2025? Experts weigh in

Mortgage rates have had a bumpy ride this year. They started 2024 in the mid-6% range, then rose to over 7%, fell precipitously in September, and now they are almost back where we started – only slightly higher.

The volatility presents quite a challenge for homebuyers, especially those on a tight budget who want to minimize their monthly mortgage costs. But will the mortgage interest rollercoaster continue into the new year? That’s what experts say.

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What will mortgage interest rates be in 2025?

Mortgage rates are “incredibly difficult to predict,” says Charles Goodwin, vice president of sales at mortgage lender Kiavi. They depend on many factors – economic, political and more – and all of this is constantly changing.

“Mortgage rates will generally change as expectations change regarding data from the labor market, inflation, GDP growth and more,” says Goodwin. “If the U.S. economy and job market remain strong, mortgage rates are expected to move very slowly.”

The Federal Reserve plays a rolesays Debra Shultz, vice president of lending at CrossCountry Mortgage.

“In recent years, Fed policy has been all about tightening to control and reduce inflation,” says Shultz (hence higher mortgage rates). “They are happy with their efforts and have moved to an easing policy that will lead to lower interest rates over time.”

Finally, a new presidential administration – and the policies it enforces – will also influence how interest rates develop next year.

“Mortgage rates will also change depending on the policies of the Trump regime,” explains Goodwin. “The policy is expected to expand the deficit, which would cause mortgage rates to remain higher for longer as more government bonds would have to be issued to cover the deficit.”

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Mortgage interest rates are expected to fall in 2025

That’s what most experts predict Mortgage rates will steadily decline in 2025, and forecasts from both the Mortgage Bankers Association (MBA) and Fannie Mae support this.

“I expect mortgage rates to slowly decline in 2025, barring an unexpected slowdown in the economy,” Goodwin says.

Will the reduction be huge? Unlikely, say professionals. MBA forecasts suggest rates will be around 6.2% at the start of the year and will drop to 5.9% by year’s end. Fannie Mae forecast a decline from 5.9% to 5.6%.

“We should see interest rates in the mid-5 percent range in 2025,” Shultz says. “After Corona, 5.5% may sound high, but historically it is a low and economically sound interest rate.”

This average interest rate of 5% However, according to Mike Hardy, managing partner of Churchill Mortgage’s Pacific Southwest region, it would come immediately and it might take some ups and downs to get there.

“I expect mortgage rates to decline slightly throughout 2025,” Hardy says. “Imagine a child on a downward escalator with a yo-yo as a visual aid to understand mortgage rate trends.”

The end result

While the news generally looks good mortgage interest, Pros say it’s probably not a smart idea to wait for lower rates unless you really have to.

“A buyer can certainly wait until next year to buy a home and will likely get a lower price, but they run the risk of paying a higher price and having significantly more competition,” Hardy says. “It seems everyone is waiting to enter the market with lower interest rates and there is significant pent-up demand. This phenomenon would cause property prices to be higher next year than they are today.”

Overall, Hardy says House prices are expected to rise by 4 to 5% next year.

“That means a $600,000 home will be worth $625,000 to $630,000 in a year,” he says. “If someone can afford a home today and finds a home that appeals to them, I would recommend buying it today and then planning to refinance the mortgage to more favorable terms in the next year or two.”