Mortgage rates fluctuate constantly, but homebuyers should expect this more turbulence than usual in the next few months.
Since the start of his second term, President Donald Trump has made several strides in his administration Politics around immigration and tradewhich many experts see as inflationary.
“Higher tariffs and restrictive immigration policies would increase costs for homebuyers at a time when affordability is near four-decade lows,” he said Matt WalshReal estate economist at Moody’s Analytics.
The average 30-year fixed mortgage rates have remained at around 7% for several weeks. While Trump has repeatedly claimed that he would cut mortgage rates to 3% (which would suggest this). severe economic crisis), the President does not set interest rates on home loans.
Even the Federal Reserve, which only sets a short-term benchmark interest rate for lenders has an indirect impact on the mortgage market. Between September and December, the central bank cut interest rates but mortgages three times Interest rates have not fallen.
That’s because interest rates are primarily determined by movements in the bond market, particularly the 10-year Treasury yield. Bond yields and interest rates rise and fall depending on how new economic data and political changes alter market speculation and risk assessments.
At the moment, Mortgage interest rates remain elevated due to a combination of factors: “strong” economic growth; potentially inflationary policies under the new Trump administration; and the Fed’s less aggressive rate-cutting path in 2025. At its first monetary policy meeting of the year 28-29 JanuaryThe central bank is expected to keep interest rates stable.
Mortgage rates will continue to fluctuate as investors speculate what’s next. If inflation remains high or begins to rise again, mortgage rates will rise, regardless of the president’s promise to lower borrowing costs.
“We are more data-dependent than ever when it comes to mortgage rates,” he said Greg SherManaging Director at NFM Lending.
Will the Fed meeting change the outlook for mortgage rates?
Given the slow progress on inflation and concerns about a resurgence, the Fed is expected to leave interest rates unchanged at its next policy meetings.
“The earliest possible rate cut would be in March, and that assumes a convincing decline in (inflation) in the two reports by then,” he said Matt Graham from Mortgage News Daily. Now, however, most of them Investors bet A further tariff reduction will not occur until late spring or early summer.
If there are no further interest rate cuts, the Fed is likely to come under pressure from the new president. In a virtual appearance at the World Economic Forum in Davos on Thursday, Trump said he would do so demand that interest rates fall immediately.
“I think I know interest rates a lot better than they do, and I think I certainly know them a lot better than whoever is primarily responsible for this decision,” Trump told reporters in the Washington Post, referring to This probably refers to the Chairman of the US Federal Reserve, Jerome Powell in the Oval Office on Thursday. “If I disagree, I will make it known.”
But there is Trump can only do so much with regard to the central bank. Aside from expressing his opinions, the president’s most direct power over the central bank is to appoint candidates to fill vacancies on the Board of Governors.
Similar to the Supreme Court, the president could appoint Fed board members whose views on monetary policy align with his own. However, Trump will not be able to make new appointments until early 2026 at the earliest.
Will mortgage rates drop in time for the spring home buying season?
Early last year, many economists optimistically predicted interest rates would fall below 6% in early 2025. But since Trump’s re-election and the Fed’s announcement that it will ease monetary policy less frequently in 2025, the forecast for mortgage rates has shifted upward.
Fannie Mae now expects average 30-year fixed mortgage rates to keep it above 6.5% until the beginning of 2025. Meanwhile, Moody’s Walsh forecasts that mortgage rates will average just under 7% throughout the year.
However, next month’s economic data could change the equation at any time. “If economic data weakens, we may have already seen the peaks of the year,” he said Logan Mohtashamisenior analyst at HousingWire.
In CNET’s Mortgage forecast 2025Mohtashami pointed out that interest rates in the low 6 percent range are still possible in 2025. But achieving that will be difficult, especially in time for the spring home-buying season, when new economic policies spur inflation or increase government debt deficits.
A look at the housing market in 2025
Today unaffordable housing market results from high mortgage interest rates, a long-standing housing shortageexpensive real estate prices and a loss of purchasing power due to inflation.
🏠 Low housing stock: A balanced real estate market typically has five to six months of supply. Most markets today expect around half that amount. Accordingly Freddie MacWe are still short of around 3.7 million apartments.
🏠 Increased mortgage Prices: In early 2022, mortgage rates reached historic lows of around 3%. As inflation soared and the Fed raised interest rates to curb it, mortgage rates more than doubled. In 2025, mortgage rates are still high, forcing millions of potential buyers out of the real estate market.
🏠 Rate lock effect: Most homeowners are tied to mortgage interest Below 5%, they are reluctant to give up their low mortgage rates and have little incentive to put their homes up for sale, so there is a lack of resale inventory.
🏠 High real estate prices: Although demand for home purchases has been limited in recent years, home prices remain high due to a lack of inventory. The median US house price was $427,179 in December, up 6.2% on an annual basis, according to Redfin.
🏠 Steep inflation: Inflation means an increase in the cost of basic goods and services, which reduces purchasing power. This also affects mortgage interest rates: when inflation is high, lenders usually increase consumer loan interest rates in order to make a profit.
What home buyers should know
It’s never a good idea to rush it buy a house Therefore, without knowing what you can afford, set a clear budget for buying a house. This is what experts recommend before buying a house:
💰 Build your credit score. Your credit score will help you determine whether you qualify for a mortgage and at what interest rate. A credit-worthiness of 740 or higher will help you qualify for a lower rate.
💰 Save for a larger down payment. A bigger one down payment allows you to take out a smaller mortgage and get a lower interest rate from your lender. If you can afford it, a down payment of at least 20% also eliminates private mortgage insurance.
💰 Search for mortgage lenders. Comparing loan offers from multiple mortgage lenders can help you negotiate a better rate. Experts recommend getting at least two to three loan estimates from different lenders.
💰 Consider renting. Decide for it rent or buy a house It’s not just about comparing monthly rent to a mortgage payment. Renting offers flexibility and lower upfront costs, but buying allows you to build wealth and have more control over your housing costs.
💰 Consider mortgage points. By purchasing, you can get a lower mortgage rate Mortgage pointswhere each point costs 1% of the total loan amount. One mortgage point is equivalent to a 0.25% reduction in your mortgage interest rate.
