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Mortgage Rate Outlook: Will Rates Fall in 2025?

As the 30-year fixed mortgage rate reaches its highest point since June, many are wondering if rates will drop enough in 2025 to make buying a house a more affordable option. The short answer is maybe, but the long answer is more complex.

Economists’ Predictions

A few months ago, economists were more optimistic about mortgage rates in 2025. However, due to various factors such as the 10-year Treasury yield, fewer upcoming Federal Reserve rate cuts, and a second Trump presidency, predictions are now more conservative. According to Fannie Mae’s December Housing Forecast, the 30-year fixed rate is expected to be 6.60% in Q1 2025 and 6.20% by Q4 2025.

Current Mortgage Rates

Here are the current mortgage rates, according to the latest data:

• 30-year fixed: 6.67%
• 20-year fixed: 6.52%
• 15-year fixed: 6.03%
• 5/1 ARM: 6.71%
• 7/1 ARM: 6.60%
• 30-year VA: 6.07%
• 15-year VA: 5.57%
• 5/1 VA: 6.32%

Refinance Rates

Here are today’s mortgage refinance rates:

• 30-year fixed: 6.71%
• 20-year fixed: 6.33%
• 15-year fixed: 5.95%
• 5/1 ARM: 5.93%
• 7/1 ARM: 6.65%
• 30-year VA: 6.08%
• 15-year VA: 5.84%
• 5/1 VA: 5.67%

Understanding Mortgage Options

When deciding between a 15-year and a 30-year mortgage, consider your short-term versus long-term goals. A 15-year mortgage comes with a lower interest rate, but your monthly payment will be higher. With a 30-year term, your monthly payment is lower, but you’ll pay more in interest over the life of the loan.

Fixed-Rate vs. Adjustable-Rate Mortgages

A fixed-rate mortgage locks in your rate for the entire life of your loan. An adjustable-rate mortgage, on the other hand, keeps your rate the same for a predetermined period, then adjusts based on several factors.

Getting the Best Mortgage Rate

To get the lowest mortgage rate, focus on your personal finances. Save more, improve your credit score, and pay down debt before shopping for homes. Apply for mortgage preapproval with multiple companies to find the best lender for your situation.

The Impact of Inflation and the Federal Reserve

Inflation and the Federal Reserve’s actions can affect mortgage rates. By watching inflation and understanding the Fed’s role, you’ll be better prepared for where interest rates are headed.