It’s no secret that mortgage interest rates have pretty much doubled since the pandemic lows a few years back. Many borrowers that are considering a home purchase or refinance, want a better idea of where mortgage rates end up in 2025.
The average conventional 30-year mortgage rates (Fannie Mae and Freddie Mac) are hovering in the 6.5% -7.0% range as we start the year. Homeowners that purchased a home in the last few years may want to explore current refinance opportunities.
Interest rates for high-balance Jumbo loans are typically higher, but the actual rate can vary greatly depending on many factors such as the borrower’s loan amount, down payment, and loan term. Example: A 30-year Jumbo loan at 80% loan to value may only be .25% -.5% higher when compared to a standard conventional loan. However, a lower down payment program like the 5% Jumbo loan will have a higher rate, possibly by .05%-1% or more due to the incurred risk to the lender.
2025 Mortgage Rate Forecast:
Many of the top mortgage industry experts agree that mortgage rates have already hit their high point and should settle at some point in 2025. There will even be some rate dips in rates along the way, like we are currently seeing this week. But overall, the rates should settle close to current levels, and could even decrease more.
There are many factors that will drive mortgage rates in 2025:
- Employment reports.
- The high rate of inflation. However, many believe inflation has now peaked.
- Worldwide uncertainty related to multiple wars and stock markets.
- Increases in the Federal Reserve’s fed funds rate? The Fed rate hikes are finished now, as they have cut rates a few times at the end of 2024. Many believe more rate cuts are likely this year.
Short-term and long-term rates:
Short-term rates on things like home equity lines of credit (HELOC) auto loans, etc are typically connected to the federal funds rate and move together. These should decrease along with the federal funds rate as the fed is planning for more cuts later this year.
Long-term rates for 30-year or 15-year mortgages for example are not directly affected when the Fed raises short rates, but will likely continue to decrease. Most expect the Treasury 10-year yield to peak around 4.5% sometime this year, before coming back down to near 3.0% by the end of the year. The decrease in the 10-year rate will also push mortgage rates lower.
But again, as stated above, it’s very likely we will see ups and downs in rates along the way. Keep in mind that lenders and banks adjust mortgage rates daily, sometimes multiple times per day. So if you are in the process of purchasing or refinancing a home, stay in close contact with your loan advisor to help you decide when to lock in your rate. Please see the chart below for the 2025 interest rate predictions.
Bonus: Learn more about ways to combat higher mortgage rates here.
Have Mortgage Rates Stopped Rising?
The long-term outlook is for mortgage rates to start decreasing in 2025 as noted in the graph above. Inflation has slowed down, and outside of normal daily fluctuations, mortgage rates should slowly decrease this year.
Homebuyers who want to learn more, or get a quick rate quote for their purchase or Jumbo refinance can call us 7 days a week, or just submit the Quick Contact Form on this page.
