When Can We Expect Mortgage Rates to Drop?

The question on everyone’s mind these days is: when will mortgage rates finally decrease? After years of rising rates and significant fluctuations throughout 2024, many are eagerly anticipating some relief.

While it’s impossible to predict the exact timing or movement of rates with absolute certainty, experts have shared insights into what we might expect as we approach next year. Here’s a look at the latest projections:

Mortgage Rates May Ease and Stabilize by 2025

Following a period of uncertainty and volatility, the most recent forecasts indicate that rates are likely to stabilize over the coming year and may even ease slightly compared to current levels (see graph below).

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains:

"Although mortgage rates remain elevated, they are expected to level off."

Key Factors Influencing the Future of Mortgage Rates

Predicting mortgage rate trends is one of the most complex challenges in the housing market. These forecasts depend on several interrelated factors, making rates a moving target. While they are projected to decline slightly, the ups and downs of economic conditions will likely persist. Here are some of the critical drivers that will shape mortgage rates going forward:

• Inflation: If inflation eases, rates could edge lower. Conversely, if inflation rises or stays stubbornly high, rates may remain elevated for longer.
• Unemployment Rate: The unemployment rate significantly impacts the Federal Reserve's decisions. While the Fed doesn’t directly set mortgage rates, its actions influence the broader economy, which, in turn, affects rates.
• Government Policies: With a new administration taking office in January, changes in fiscal and monetary policies could influence financial markets and, ultimately, mortgage rates.

Keep in mind that forecasts are based on the best data available at the moment and may change as new information emerges. Trying to perfectly time the market isn’t practical. Instead, focus on what you can control to prepare for homeownership:

• Improve your credit score.
• Save extra funds for your down payment.
• Automate your savings to stay on track.

Partner with a trusted real estate agent and lender to stay informed and gain expert advice tailored to your goals. This way, you’ll be ready to act when the time is right.

Bottom Line

If you’re planning to move and want to stay updated on the latest trends in mortgage rates, it’s essential to stay informed. Partnering with a knowledgeable real estate agent and an experienced lender can provide you with valuable insights and guidance tailored to your unique situation. They’ll keep you informed about market shifts, explain how changing rates might affect your plans, and help you make well-timed, confident decisions. Building a strong team of experts is one of the best ways to navigate the complexities of the housing market and set yourself up for success.