You Can Expect These Mortgage Rates in 2025 📈

Here is a short update from late November 2024 that I think is worth reading even now, because the same rule applies every year.

Mortgage rates do not move in direct correlation with the Fed rate. People hear that the Fed cut and assume their mortgage rate will drop, and often it does not. Mortgage rates move up or down based on inflation and on the economy. If the economy is strong, mortgage rates tend to stay higher. If inflation is above 2%, mortgage rates tend to stay higher. So for rates to come down in 2025, we would have to see much lower inflation numbers, a weakening economy, or both.

I pointed back to the 2016 election and President Trump's first term, which started in 2017. We had a very strong economy then. So with a new administration coming, you are really betting on how the economy does and how that affects mortgage rates. This is my opinion, and I said it plainly: I think the rates we have today are going to be here for a while.

I also covered the idea of increasing supply. The plan that was discussed would deregulate and change zoning laws so developers could build at a lower cost, give up some federal land to create affordable housing, and give incentives to developers. None of us really know how any of that works out until it is actually signed and implemented, and I said so. But the reason I mention it is that supply is half of the housing story.

If you want to know where the housing market is headed, you always want to keep an eye on two things, interest rates and inventory. Interest rates tell you what a buyer can afford each month. Inventory tells you how much choice and negotiating power buyers and sellers have. Right now, that is what we are watching.

The takeaway for you, if you are a buyer or a homeowner, is not to try to guess the Fed's next move. It is better to know your numbers. What would your payment be at today's rate? What would it be if the rate dropped a point? If you buy now at today's rate and rates fall later, a refinance may be an option, and we can run the break-even before anything else.

If you own a home and want to know whether a refinance would ever make sense, or you are shopping for a purchase, I would be glad to run the numbers with you. See refinance options or get your rate. MortgageOne is now licensed in 49 states.