One of the biggest questions on everyone’s minds right now is: when will mortgage rates come down? After several years of rising rates and a lot of bouncing around last year, we’re all eager for some relief. While no one can project where rates will go with complete accuracy or the exact timing, experts offer some insight into what we might see going into next year. Here’s what the latest forecasts show.
Mortgage Rates Are Expected to Ease and Stabilize this Year
After a lot of volatility and uncertainty, the most updated forecasts suggest that mortgage rates will start to stabilize over the next year, and should ease a bit compared to where they are right now. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), “While mortgage rates remain elevated, they are expected to stabilize.”
As we move through 2025, many experts expect mortgage rates to gradually decrease, which will provide some relief for homebuyers and homeowners looking to refinance. Though these predictions are based on current data, the timeline and pace of the decline are still uncertain due to the influence of various factors in the broader economy.
Key Factors That’ll Impact the Future of Mortgage Rates
While most forecasts show that mortgage rates will ease over time, it’s important to recognize that predicting exactly when and by how much is incredibly difficult. Mortgage rates are affected by numerous economic variables, making them a moving target. Here are a few key factors that will likely shape the future of mortgage rates:
1. Inflation
Inflation remains a major driver of mortgage rates. If inflation continues to cool, there’s a higher chance that rates will dip further. On the other hand, if inflation remains stubbornly high or increases again, rates could stay elevated longer than expected. Inflationary pressure is a major concern for the Federal Reserve, which adjusts interest rates to try and stabilize the economy, and its actions influence mortgage rates.
2. Unemployment Rate
The unemployment rate plays a significant role in decisions made by the Federal Reserve (the Fed). While the Fed does not directly set mortgage rates, its monetary policies—based on broader economic conditions like employment—can influence how rates move. If the job market remains strong and the unemployment rate stays low, the Fed may continue to implement measures that could lead to more stable rates. However, if unemployment rises, the Fed may take different actions, which could impact rates.
3. Government Policies
With the upcoming change in administration and fiscal policies set to be re-evaluated starting in January, we could see shifts in how financial markets respond. New policies could influence the overall economy, which in turn will affect where mortgage rates are heading. Government fiscal actions and monetary policies will likely play a critical role in determining the direction of mortgage rates throughout 2025.
4. Global Economic Conditions
Global events, such as geopolitical developments or economic crises in other parts of the world, can also affect mortgage rates. Any global economic instability could lead to shifts in investor behavior, affecting interest rates in the U.S. as investors respond to broader economic conditions.
What Can Homebuyers and Homeowners Do Now?
While the future of mortgage rates remains uncertain, there are steps you can take right now to prepare, regardless of where rates go.
Focus on What You Can Control:
- Improve Your Credit Score: A higher credit score can help you secure a lower mortgage rate when the time comes. Take steps now to improve your credit by paying off debt and keeping credit card balances low.
- Save for a Down Payment: The more you can save for a down payment, the better positioned you’ll be when rates do ease. A larger down payment can also help you secure better loan terms.
- Automate Your Savings: Set up automatic transfers to a savings account to help you build up funds for your future home purchase.
These steps will ensure that you’re ready when mortgage rates begin to dip, allowing you to move forward with your homeownership goals.
Bottom Line
While no one can predict exactly when mortgage rates will come down or how far they will fall, most experts agree that they will likely stabilize and ease in 2025. Key factors like inflation, unemployment rates, and government policies will play major roles in determining the timing and scale of any changes. In the meantime, focus on your financial readiness and stay connected with Adam and Nelson at the Brevard is Best Team to get the most up-to-date real estate advice and guidance. By preparing now, you’ll be in a stronger position to act when rates finally dip.