Homebuyers may be let down if they were anticipating for more appealing mortgage rates in the upcoming year.
That is the conclusion drawn from a number of analysts’ 2025 housing projections, the majority of which were made public in recent weeks.
The average rate on a 30-year mortgage is expected to stay above 6% in the upcoming year, according to the majority of the eight estimates, with some predicting an upper range of 6.8%.
That range would roughly correspond to the range of rates this year. According to mortgage buyer Freddie Mac, the average rate has dropped as low as 6.08% in September, which is a two-year low, and as high as 7.22% in May. This week, the average rate was 6.6%.
According to Mark Fleming, chief economist at First American, the average rate on a 30-year mortgage is expected to be between 6% and 6.5% by the end of next year, making it difficult to envisage mortgage rates below 6% even then.
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Whether President-elect Donald Trump’s key policy proposals ultimately result in increased inflation and the national debt, which might keep mortgage rates high, is the largest wild card for mortgage rates next year. This is because changes in the U.S. 10-year Treasury yield, which lenders use as a guide to price house loans, can be influenced by the economy, inflation, and the U.S. deficit.
Trump claims he wants to reduce taxes, loosen regulations, and slap tariffs on foreign goods—actions that could boost the economy but also raise inflation and the national debt.
Citing concerns that Trump’s proposed tax cuts would increase the U.S. deficit and his tariffs plan could exacerbate inflation, Redfin economists predict that the average rate on a 30-year mortgage will be approximately 6.8% next year.
However, the estimate indicates that if the economy deteriorates or if proposals for tax cuts and tariffs are retracted, mortgage rates may fall to the low-6% area.
Regarding how low the average rate on a 30-year mortgage will drop in 2025, a few predictions are more optimistic. According to TD Economics, the average rate will fall to 5.8% by the end of the year, while Fitch Ratings sees it ranging between 5.8% and 6.4%.
Since 1971, the average rate has been below its historical average of 7%. However, since home prices have increased far faster than salaries over the past ten years, it isn’t much comfort to those looking to buy a home.
According to Lisa Sturtevant, chief economist at Bright MLS, it’s like a double whammy on affordability that someone with a 6% rate wasn’t dealing with thirty years before.
With rates in the 6% area, most homeowners who now have a mortgage would have to accept a higher rate if they were to sell and finance a new residence. According to Realtor.com, over four out of five homeowners who have a mortgage currently have an interest rate below 6%.
The coming year holds some promise for homebuyers, according to economists. A sustained rise in the number of homes for sale and a modest rate of home price growth should help those who can afford to buy regardless of rates or who can avoid them completely by using profits from home equity.
— The Associated Press’s Alex Veiga
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