The year 2024 has been a wild ride for mortgage rates, with ups and downs that have kept many homebuyers and homeowners on edge.
Early in the year, rates were rising, but they dropped in the fall before climbing again.
So, what’s in store for 2025? Will mortgage rates finally go down?
Let’s break it all down and look at what professional are predicting for mortgage rates in 2025.
Where Mortgage Rates Stand Right Now
So far in 2024, mortgage rates for a 30-year fixed loan have been all over the place.
At the start of the year, they were at 6.62%, then they hit a high of 7.22% in May before dipping down to 6.08% in September.
Right now, they are sitting at around 6.81%.
Why Mortgage Rates Are Acting This Way
The world of mortgage rates can be tricky to understand, so let’s hear what the experts have to say.
Rick Sharga, CEO of CJ Patrick Company, explains that rates started to rise after the Federal Reserve made changes to prevent a big recession during the pandemic.
When inflation skyrocketed, the Federal Reserve raised rates, which pushed mortgage rates up, making it harder for people to afford homes.
Now, rates are still rising, but the bond market is reacting to government debt, which is causing mortgage rates to stay higher.
Nadia Evangelou, a senior economist, adds that even though the Federal Reserve has lowered interest rates a bit, mortgage rates are still high because of the way the market works.
Higher Treasury yields are keeping rates up.
Dennis Shishikov, an economics professor, points out that the Fed’s actions, like raising interest rates, have made it more expensive to borrow money.
This has led to higher home prices and squeezed buyers’ budgets.
Mortgage Rate Predictions for 2025: Will Rates Go Down?
Here’s what the experts predict for mortgage rates in 2025.
- Nadia Evangelou thinks the 30-year mortgage rate will average around 6% in 2025. While rates may drop, they won’t fall too much.
- Selma Hepp predicts rates will be a bit higher, around 6.6%, and might drop to 6.35% by the end of the year.
- Jason Gelios, a realtor, sees the 30-year rate staying around 6%, with the 15-year mortgage hovering around 5.75%.
- Rick Sharga thinks rates might start 2025 around 7%, but they could slowly drop throughout the year, ending closer to 6%.
- Albert Lord III predicts the 30-year mortgage will average around 6%, and the 15-year mortgage will be around 5.6%.
What Should You Do If You’re Buying or Refinancing in 2025?
If you’re thinking about buying a home or refinancing in 2025, here’s what the experts suggest:
- Shirshikov advises homebuyers to focus on their financial stability. If you find a home that fits your budget, locking in a rate, even if it’s higher, might be smart. If you can, wait until mid-2025 for better rates.
- Lord says that home prices may not go down much because there’s still a shortage of homes. If mortgage rates drop, consider an adjustable-rate mortgage (ARM), but only refinance if rates are really high—like above 7.5%.
- Evangelou suggests not waiting too long for a big drop in rates, as they will probably stabilize around 6%. With fewer homes on the real estate market, there will be much more competition for the homes that are available.
- Gelios advises buyers not to wait for rates to drop too much. If you buy a home now, you always refinance later if rates go down.
- Krieger says that even though rates might not be ideal, home prices won’t drop much either. If you can afford a home now, it might be a good time to buy and refinance later if needed.
The Bottom Line: Should You Buy or Refinance in 2025?
In short, mortgage rates are expected to stay around 6% for most of 2025.
If you’re buying a home, don’t wait for a big drop in rates—it might be better to buy now before competition heats up.
If you’re refinancing, consider whether it makes sense based on your current rate and the potential savings.
Before making a decision, it’s always smart to ask a mortgage professional before buying any home.