Mortgage Rates: What’s Next for Homebuyers and investors?

Mortgage rates have been unpredictable this year. Starting 2024 at around 6%, they climbed above 7%, fell sharply in September, and have now settled slightly higher than where they began. For buyers on tight budgets, these ups and downs have been a challenge.

But what about interest rates 2025? What can we expect, and how do the latest interest rate predictions 2025 inform those expectations? Here’s what experts say.

Mortgage Rate Trends and Projections

Are Mortgage Rates Predictable?

Accurate interest rate predictions 2025 are tricky due to economic and political factors, says Charles Goodwin, vice president at Kiavi. “Rates hinge on data from the job market, inflation, and GDP growth, which are hard to forecast precisely,” he explains.

This unpredictability means interest rates 2025 will likely be influenced by several ongoing factors. Goodwin notes, “If the economy remains stable, we can expect rates to adjust gradually over time.”

The Federal Reserve’s Role

According to Debra Shultz of CrossCountry Mortgage, the Federal Reserve will play a key part in shaping interest rates 2025. “With inflation easing, the Fed’s policies will support lower rates over time,” she says.

Political Impact on Interest Rates 2025

Changes in federal policies under a new administration could also affect interest rates 2025. “If deficit-expanding policies dominate, we could see rates stay higher for longer as more treasuries are issued to cover the shortfall,” Goodwin explains.

Government policies under a new administration could also affect interest rates 2025. Policies increasing the federal deficit could lead to higher rates if more treasuries are issued to cover spending.

Interest Rate Predictions 2025

Experts generally agree that interest rates 2025 will trend downward, albeit gradually. Projections from the Mortgage Bankers Association (MBA) and Fannie Mae both suggest declining rates throughout the year.

Goodwin predicts that interest rates 2025 will decrease steadily, assuming no major economic disruptions. MBA expects rates to begin 2025 at 6.2% and end at 5.9%. Meanwhile, Fannie Mae forecasts a dip from 5.9% to 5.6%.

“Though mid-5% rates may seem high compared to pre-pandemic levels, they’re historically healthy,” Shultz says.

Mike Hardy of Churchill Mortgage echoes this sentiment but warns of potential fluctuations: “Think of interest rates 2025 as a yo-yo on a descending escalator—there will be ups and downs along the way.”

Buy Now or Wait for Interest Rates 2025?

The prospect of lower interest rates 2025 may tempt buyers to delay their purchases, but experts caution against waiting too long.

“A lower rate in 2025 might come with higher home prices and more competition,” Hardy explains. Projections suggest a 4% to 5% rise in home prices, meaning today’s $600,000 home could cost $625,000 to $630,000 next year.

“If you find a home you can afford today, buying now and refinancing later when interest rates 2025 drop might be the smarter choice,” Hardy says.

Conclusion

While the latest interest rate predictions 2025 suggest declining rates, buyers face a balancing act. Rising home prices and pent-up demand could offset the benefits of waiting for lower interest rates 2025. Making an informed decision now, while planning to refinance later, can help buyers stay ahead in a dynamic housing market.

By understanding interest rates 2025 trends and consulting with professionals, buyers can navigate this unpredictable market confidently.