A key question on everyone’s mind right now is: when will mortgage rates finally drop? After years of increases and significant fluctuations throughout 2024, many are hoping for some relief.
While no one can predict the exact timing or direction of rates with certainty, experts provide valuable insights into what we might expect in the coming year. Here’s a look at the latest forecasts.
Mortgage Rates Are Expected To Ease and Stabilize in 2025
Following a period of volatility and uncertainty, the latest forecasts indicate that mortgage rates are expected to stabilize over the next year and may decline slightly from their current levels (see graph below).
Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains: “Although mortgage rates are still high, they are anticipated to stabilize.”
Key Factors That’ll Impact the Future of Mortgage Rates
Predicting mortgage rates is one of the most challenging forecasts in the housing market because it depends on several key factors aligning. While rates are expected to ease slightly, they will remain a moving target, influenced by ongoing economic shifts. Here are a few major factors that will shape where rates go from here:
- Inflation: If inflation continues to cool, mortgage rates could trend downward. However, if inflation rises or remains stubbornly high, rates may stay elevated longer.
- Unemployment Rate: The unemployment rate will significantly influence the Federal Reserve’s (the Fed) decisions. While the Fed doesn’t directly set mortgage rates, its actions reflect broader economic trends, which can impact rate movements.
- Government Policies: With a new administration taking office in January, changes to fiscal and monetary policies could affect financial markets and mortgage rates.
It’s important to remember that these projections are based on current data, and as new economic information emerges, experts will adjust their forecasts. Trying to time the market based solely on these predictions can be risky.
Instead, focus on what you can control right now. Improve your credit score, save additional funds for your down payment, and automate your savings to stay on track. These steps will help you prepare and move closer to your homeownership goals.
Lastly, stay connected with a trusted real estate agent and lender. They’ll provide the latest updates and expert guidance to help you make informed decisions when it’s time to make your move.
Bottom Line
If you’re planning a move and want to stay up-to-date on mortgage rate trends, get in touch with us!
