Mortgage rates have been a conundrum for the last few years, leaving prospective first-time buyers on the outside looking in and owners worried about dipping their toes into the market where they may lose a better rate. But what’s going to happen this year?
According to a new report from Bankrate, rates for the average 30-year fixed-rate mortgage are expected to fall to 6.5% by the end of 2025, down 0.5% from the end of 2024.
While many have been waiting for rates to fall back down to the low single digits that they were at the beginning of the decade, Greg McBride, the chief financial Analyst for Bankrate, says that this may be the new normal.
“Rates were abnormally low for the better part of 15 years, and they’ve been abnormally high for the last two. They’re coming down, but where they’ll settle out is going to be a level that’s higher than what we had seen before 2022,” McBride said.
But Bankrate isn’t the only financial institution predicting what will happen with mortgage rates in 2025. The National Association of Realtors is predicting that rates will be around 6% in 2025, while Redfin suggests they could have a weekly average of around 6.8% throughout most of this year.
On top of that, Realtor.com’s predictions show that rates will average 6.3% in 2025, ending the year at around 6.2%.
“Generally, we expect mortgage rates to ease and home prices to tick higher in the coming year, resulting in very little, if any, change in the cost to purchase a home,” Hannah Jones, Realtor.com senior economic research analyst, shared in the predictions.
Still, some expect there could be a shakeup in the housing market with the incoming administration poised to make several economic moves.
If President-elect Trump’s policies result in higher inflation and an increase in the national debt, rates could stay elevated or even rise. That’s due to the US 10-year Treasury yield, which lenders use as a guide to price home loans, being impacted by those factors.
Redfin has predicted that Trump’s proposed tax cuts would increase the nation’s debt, and his tariffs may stoke inflation, ultimately resulting in higher mortgage rates.
Still, Redfin notes that if the economy sours or if the plans for tariffs and tax cuts are dialed back, mortgage rates could drop.