Will Mortgage Rates Dip Below 6% in 2025? Expert Insights Inside!

December 8, 2024

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Will Mortgage Rates Dip Below 6% in 2025? Expert Insights Inside!

The 30-year mortgage rate is hovering around 7%. What lies ahead for mortgage rates in 2025? – Getty Images

The 30-year mortgage rate is officially back at 7%! So, when can we expect these rates to dip—and by how much?

After consulting with leading economists, the consensus is clear: by the close of 2025, we’re looking at a projected drop in the 30-year fixed mortgage rate to around 6.2%. However, don’t expect it to dip below that threshold anytime soon.

As of late November, the 30-year rate was sitting at approximately 7%, driven by the rocky seas of market uncertainty. Once the markets regain their footing and clarity shines through a second Trump administration, we could see the 30-year rate sliding back toward the enticing 6% mark. Vishal Garg, a key player at Better.com, an online mortgage lender, has weighed in on this situation.

A drop in mortgage rates could reignite the flames of home-buying enthusiasm. Yet, prospective buyers should brace themselves for persistently high home prices that have reached dizzying heights this year.

Let’s dive into the latest forecasts regarding the trajectory of mortgage rates for 2025:

Realtor.com anticipates that the average 30-year mortgage rate will settle at about 6.3% in 2025, inching down to 6.2% by year-end, according to a recent forecast.

With the Trump administration gearing up early next year, analysts expect a calming effect on the financial markets. Currently, there is skepticism about which of the President-elect’s policies will take shape, and whether they will align with his campaign rhetoric.

Market speculation regarding how Trump’s policies might impact the economy can sway mortgage rates significantly. If inflation fears rise, markets will anticipate that the Federal Reserve may keep interest rates higher for longer. Mortgage rates typically follow the lead of the 10-year Treasury note, which means they could rise and fall in tandem.

During his campaign, Trump made bold promises to slash mortgage rates to as low as 2% or even 3%. However, it’s essential to recognize that the president cannot directly control interest rates.

“The American people have given President Trump a robust mandate to deliver on his campaign promises, including lowering housing costs across the board. We are confident he will make it happen,” asserted a spokesperson for the Trump-Vance transition team.

Realtor.com is backed by News Corp subsidiary Move Inc. and is a trusted name in real estate.

Bright MLS forecasts the 30-year mortgage rate will average 6.4% in 2025, tapering down to 6.25% by the year’s end, according to their recent projections.

As long as the U.S. economy remains robust, rates are expected to stay above 6%. A thriving economy could trigger inflation and lead the Fed to hit the pause button on rate cuts, Bright MLS notes.

Trump’s proposed policies, including tariffs and immigration reforms, might also spark inflation and exacerbate the federal deficit, potentially pushing mortgage rates higher.

Fannie Mae predicts a similar average of 6.4% for the 30-year mortgage rate in 2025, ending the fourth quarter at 6.3%. This marks a shift from earlier forecasts that expected rates to dip below 6% early in the year.

As the markets fluctuate, there’s a growing sense of uncertainty, which could add risk to the economic forecast. Financial markets are showing volatility as they assess the incoming administration’s influence on the U.S. economy.

Moving beyond 2025, experts expect rates to hover around 6%. Lawrence Yun, chief economist at the National Association of Realtors, indicated at a recent conference that a return to the 4% range is unlikely. Instead, we should prepare for a new normal oscillating between 5.5% and 6.5%.

It’s important to note that Trump’s suggested tariffs could drive inflation in the economy, compelling the Fed to maintain higher interest rates for a prolonged period.

Trump’s proposal to privatize housing giants Fannie Mae and Freddie Mac could also pose challenges for homebuyers, according to analysts, who caution that this move could lead to higher mortgage rates.

However, there is skepticism about the feasibility of this plan gaining enough traction.

Related: Explore why the 30-year fixed-rate mortgage remains resilient in today’s market.

Read more: Discover how a second Trump presidency could impact homebuyers and sellers alike.

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