Last year, hopeful home buyers were pushed to the sidelines due to the elevated mortgage rates and home prices. While inflation has cooled since it peaked in 2023, people hoping to buy homes are wondering how mortgage rates would fare this year.
In the first full week of 2025, the contract rate for the 30-year fixed-rate mortgage remained elevated, settling at 6.93%. This marked a 0.02-point increase from the week before. The contract rate for the 15-year term also settled at 6.14%, which increased by 0.01% from the prior week, according to Freddie Mac.
The Federal Reserve, however, has been hinting at making fewer cuts to their benchmark rates this year. Specifically, they are projecting making only two rate cuts in 2025, which fell from the four they forecasted last September.
What Are the Predictions From Experts This Year?
The predictions vary widely. Some professionals believe the mortgage rates will gradually decline within the year. Chris Heller, president of Movoto.com, believes mortgage rates could drop below 6%.
Other experts like Tomo Mortgage's senior vice president and chief market analyst, Emanuel Santa-Donato, predicted that mortgage rates are unlikely to fall under 6% this year.
Some predictions said mortgage rates will likely hover between 6% and 7% throughout 2025, per CBS News.
How Will Mortgage Rates Fall?
Mortgage rates can fall for several reasons. One big factor is when the Federal Reserve lowers its own benchmark interest rate or signals that more cuts are coming. Even though the Fed's rate doesn't perfectly match mortgage rates, it still strongly influences them because it affects how expensive it is for banks to lend money. When the overall cost of borrowing drops, lenders are often able to offer lower mortgage rates.
Beyond the Fed's actions, other factors can pull rates down. If inflation goes down, mortgage rates typically drop because investors aren't trying to protect themselves against rising prices. Slower economic growth or uncertainty in financial markets can also make investors move money into safer investments like government bonds, bringing down bond yields and, by extension, mortgage rates.
