One of the most pressing questions on everyone’s mind right now is: when will mortgage rates begin to drop? After years of rising rates and significant fluctuations throughout 2024, we’re all hoping for some relief.
While it's impossible to predict with certainty exactly when and by how much rates will change, experts have offered insights into what we might expect in the coming year. Here’s what the latest forecasts suggest.
Mortgage Rates Expected to Ease and Stabilize in 2025
After a period of volatility and uncertainty, the most recent projections indicate that mortgage rates should start to stabilize over the next year, with a slight decrease from current levels. Projections from Fannie Mae, Wells Fargo, and the Mortgage Bankers Association suggest that rates could begin at 6.58% and end the year at 6.33% in 2025.
As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), puts it: "While mortgage rates remain elevated, they are expected to stabilize."
Key Factors That Will Impact Mortgage Rates
It’s crucial to understand that predicting the timing and movement of mortgage rates is one of the toughest tasks in the housing market. These predictions depend on a number of key factors aligning. While rates are expected to slightly decrease, they will still fluctuate based on ongoing economic conditions. Here are some of the major factors that will influence future rates:
- Inflation: If inflation slows down, mortgage rates could dip further. However, if inflation continues to rise or remains stubbornly high, rates may stay elevated for longer.
- Unemployment Rate: The unemployment rate plays a key role in the Federal Reserve's decisions. While the Fed doesn’t directly set mortgage rates, their actions reflect broader economic trends, which can affect rates.
- Government Policies: With a new administration taking office in January, fiscal and monetary policies could also impact the financial markets and influence where rates go from here.
These forecasts are based on the best available data at the moment, but they will likely be updated as new economic information becomes available. Therefore, it’s important not to try to time the market based solely on these projections.
Instead, focus on what you can control right now. Work on improving your credit score, save for a larger down payment, and automate your savings. These steps will help you move closer to your homeownership goals.
