2025 Mortgage Rate Predictions: Will Rates Fall?

2024 represented a year of ups and downs for many mortgage borrowers and home shoppers. The reason? Average rates for the 30-year fixed-rate mortgage, while rising in the spring, dipped down in the fall and, unfortunately, have climbed higher in recent weeks.

What direction are rates likely to take next year? That’s the million-dollar question many hopeful buyers and prospective refinancing candidates continue to ask. With the current year drawing to a close, now’s a good time to explore answers to that question in depth.

For clarity on this topic, we reached out to a group of industry insiders and asked for their mortgage rate predictions for 2025.

In this article (Skip to...)

• Current mortgage climate
• Mortgage rate predictions
• Advice for homebuyers
• The bottom line

Where mortgage rates stand today

Looking closer at typical rates for the 30-year home loan, it’s been a roller coaster ride across 2024. The benchmark 30-year fixed-rate home loan began the year averaging 6.62%. Gradually, rates escalated to a yearly high of 7.22% in May before dropping to 6.08% in late September—a two-year low—per the Federal Reserve Bank of St. Louis.

At the time of this writing, rates are higher, averaging 6.81%.

Examining the existing mortgage climate

Raw numbers don’t tell the whole story. For greater context and clarity, it’s helpful to ask the experts how we got to this point. Here’s a roundup of their answers.

Rick Sharga, president/CEO of CJ Patrick Company: “We’re in somewhat uncharted territory when it comes to mortgage rates. This uncertainty started with drastic changes to fiscal and monetary policy to prevent a serious recession - or maybe even a depression - during the onset of the COVID-19 pandemic. The Federal Reserve implementing a zero-interest-rate policy drove mortgage rates to historic lows, which led to a boom in home sales and soaring home prices. But as inflation rose to 40-year highs, the Fed reversed course, dramatically raising rates, and the mortgage market followed suit, with interest rates doubling in a single calendar year for the first time in U.S. history. This crushed affordability for millions of prospective homebuyers, and we’re in the third consecutive year when we’ll sell fewer homes than the year before. The Fed finally began cutting rates, and most forecasters expected mortgage rates to decline, but the bond market is now reacting to a record Federal deficit, which is approaching $36 trillion, by raising yields on 10-year Treasuries, causing mortgage rates to creep back up.”

Nadia Evangelou, senior economist and director of real estate research, National Association of REALTORS: “Despite the Federal Reserve’s recent interest rate cuts, mortgage rates remain higher than before the first rate cut in September. This reflects the intricate dynamics between Federal Reserve policies, Treasury yields, and mortgage rates, as the market had already factored in the expected rate cuts.”

Dennis Shishikov, adjunct professor of economics at City University of New York: “The Fed’s consistent rate hikes—aimed at curbing inflation—have pushed borrowing costs higher across the board. In addition, a low inventory of homes for sale has sustained upward pressure on prices, meaning even as rates climbed, affordability has been squeezed further for buyers. The journey here began with pandemic-era policies that kept interest rates near zero to stimulate economic recovery. While this spurred a housing boom, it also laid the groundwork for significant inflation. The subsequent reversal—including quantitative tightening and rate hikes—has been necessary but painful, particularly for first-time homebuyers and middle-income households.”

Selma Hepp, chief economist for CoreLogic: “At close to 7%, mortgage rates remain notably above where most expected them to be at this point. Expectations of higher debt and deficits by the incoming administration, and the potential for re-inflation, are keeping 10-year treasury yields higher. In addition, mortgage rate spread remains elevated as the Fed steps out of buying mortgage-backed securities and fewer investors are interested in stepping in while mortgage rates remain elevated. Lastly, while the Fed is still in the loosening cycle, the overall sentiment is that the terminal rate for the Fed will be higher given the stronger economic data.”

Richard Staniszewski, CEO, Hera Title: “Inflation has continued its path of cooling, yet the market is still facing uncertainty when it comes to risk. Strong economic data has been reported, only to be later revised. The election in the U.S. and the upcoming changes to fiscal policy have also injected caution, which has all led to the 10-year treasury with higher yields than expected. The good news is even though there is caution in the market, rates seem to be leveling around a mean.”

Albert Lord III, founder/CEO, Lexerd Capital Management LLC: “Mortgage rates have declined thanks to the two interest rate cuts of the Federal Reserve but remain elevated due to strong employment data and the continuing spending of households. Rates remain tied to longer-term Treasury yields, which are still elevated due to concerns about fiscal deficits.”

Mortgage rate predictions for 2025: Will rates go down?

Wondering what home loan rates might average in the coming year? Here’s a summary of our panel’s 2025 predictions for 30-year and 15-year fixed-rate mortgage rates.

Evangelou: “In 2025, the 30-year fixed mortgage rate is likely to average around 6%. Although the Federal Reserve will continue lowering rates next year, I don’t expect meaningful decreases in rates.”

Hepp: “We expect mortgage rates to average about 6.6% in 2025, ending at about 6.35% at the end of next year. The decline will be mostly driven by lower Fed Funds rate and some narrowing of mortgage rate spread as we gleam more certainty into the Fed’s projected path.”

Jason Gelios, Realtor, Community Choice Realty: “Going into 2025, I foresee mortgage rates hovering around 6% for your standard 30-year, fixed-rate mortgage. I predict the 15-year mortgage rate will average at 5.75% through the majority of 2025.”

Rose Krieger, senior home loan specialist, Churchill Mortgage: “I hope mortgage rates will follow the current trend and possibly drop into the high 5% range. Average 15-year mortgage rates could stay similar to the 30-year rates, as they have been recently.”

Sharga: “It seems likely that 30-year fixed mortgage rates will begin 2025 right around 7.0%, and decline slightly slowly and unevenly over the rest of the year—up slightly some months, down in others. Assuming that bond yields stay in the 4.0% to 4.25% range, mortgage rates could come down by a full point by the end of the year, ending around 6.0%. Rates on 15-year mortgages will probably follow the same up-one-month, down the next pattern as 30-year mortgages, ending 2025 slightly lower, between 5.0% and 5.25%.”

Lord: “The 30-year fixed mortgage rate is projected to average approximately 6.0% across 2025. Meanwhile, the 15-year fixed mortgage rate is projected to average 5.6% across 2025. This is because Federal Reserve policies are gradually easing interest rates due to approaching the target inflation, consumer spending will moderate as wage inflation has been contained, trends point to moderate increases in prices, and economic growth due to deregulation and optimism about future investments.”

Staniszewski: “The general consensus for the 30-year fixed mortgage rate is a moderated downward trend, beginning the year at the 7% percent mark and moving to a baseline of 6.1% by the third quarter of 2025. We should see the 15-year mortgage open 2025 right around the 6.1% mark and ultimately wind up somewhere in the neighborhood of 5.25% by the end of the year.”

Shirshikov: “I project the 30-year fixed mortgage rate will average 6.75% across 2025. While inflation is likely to moderate further, the Federal Reserve’s cautious stance will keep rates elevated. Additionally, geopolitical uncertainties and the structural imbalance in housing supply and demand will contribute to a sustained higher baseline for rates. The 15-year fixed mortgage rate is likely to average around 6.0% for 2025.”

Advice for homebuyers and homeowners in 2025

Considering their rate forecasts and various factors in 2025—such as home prices, housing inventory, and buyer demand—here’s our team’s guidance on buying a home and refinancing your mortgage.

Shirshikov: “For buyers, the decision hinges on individual financial stability and market conditions. If you find a home that meets your needs and aligns with your budget, locking in a rate—even a slightly higher one—can be prudent. Tools like rate buydowns or adjustable-rate mortgages (ARMs) may also offer flexibility. For those with the option to wait, 2026 could present a more favorable rate environment. However, with continued inventory constraints, prices may not soften significantly, so balancing timing with opportunity is critical. Refinancing in 2025 should be approached strategically. Homeowners should evaluate the break-even point—the time it takes for monthly savings to cover refinancing costs—and consider market trends. If rates show signs of a more pronounced decline by mid-year, waiting could prove advantageous.”

Lord: “Housing prices are unlikely to moderate significantly due to ongoing supply and demand imbalances. Potential buyers should act decisively while staying within their budget. If mortgage rates are expected to decline in the medium term, an adjustable-rate mortgage (ARM) could be an option. And refinancing makes sense only if mortgage rates exceed 7.5%, a recent post-covid phenomenon. Mortgage rates will be moderate in 2025, and this may be a good year to refinance.”

Evangelou: “My advice is not to wait. Waiting is unlikely to result in better opportunities, as I don’t foresee any significant drops in mortgage rates next year or the year after. Rates will stabilize around 6%, becoming the new norm. When mortgage rates hover near 6.5%, the market tends to see more home buyers, and with limited supply, more buyers lead to more competition. For homeowners considering refinancing in 2025, the key is to focus on the specific financial benefits that refinancing can offer in their situation, as mortgage rates are expected to stabilize around 6% for the next couple of years. While many borrowers still hold ultra-low rates, nearly 4.3 million loans originated in 2023 had rates above 6%, suggesting an opportunity for increased refinancing activity next year.”

Sharga: “Prospective homebuyers should figure out what they can afford based on whatever current mortgage rates are, and not wait for rates to decline dramatically or for home prices to crash. Unfortunately, affordability will remain challenging in the foreseeable future. Buyers may want to investigate down payment assistance resources, consider purchasing a smaller or older home to save money, or look at less expensive housing markets if their circumstances don’t require them to live in a specific area. Unfortunately, refinancing a mortgage into a lower rate in 2025 doesn’t seem likely for the overwhelming majority of borrowers, most of whom have rates below 6%.”

Gelios: “Buyers who wait it out until mortgage rates decrease could face higher home prices due to the increased amount of home buyers entering the market and increased seller confidence. Buyers should be aware that if they make a purchase sooner than later, they could always refinance their interest rate should a better rate be available.”

Hepp: “More for-sale inventories, as well as less competition in the housing market, will allow for more balanced conditions than those seen over the last few years. With home prices expected to continue to move up, waiting is not always the best option. Also, if mortgage rates decline notably, we could see competition intensify again and put pressure on home prices.”

Krieger: “Rates may not be where you want them, but the prices of homes are not predicted to come down anytime soon. If you can purchase a home that suits your needs now, you can always refinance if and when rates are more desirable.”

The bottom line: Mortgage rate predictions for 2025

Ideally, these 2025 mortgage rate predictions and insights can assist you in making a well-informed decision about purchasing and financing a home. However, keep in mind that your circumstances are unique, and the guidance provided may not align perfectly with your personal goals, timeline, or budget.

To make the best choice, consider consulting with a trusted real estate agent or Realtor, a knowledgeable lending professional to explore loan options tailored to your financial situation, a real estate attorney to ensure legal protection during the transaction, and a personal finance expert or certified financial planner who can help evaluate your finances and determine whether buying now or later is the right decision for you.