How Mortgage Rates Will Change in 2025, According to Experts

The Federal Reserve cut its key interest rate by a quarter-point on Thursday as the central bank stuck to its decided course of action despite mortgage rates inching higher week after week.
It was the second cut implemented by the Fed after finally reversing its rate hike strategy in September, when it cut its key interest rate by half a percentage point, its biggest cut since March 2020. The decision was backed by falling mortgage rates and consistently lower inflation. But since then, mortgage rates have started climbing back up.
“In the lead-up to the previous Fed meeting, we saw rates take a significant dip as the markets anticipated the beginning of the rate-cutting cycle, and general data seemed to confirm that inflation was abating,” Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage, told Newsweek.
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“Since that time, however, we have seen rates jump up significantly and the rally in the bond market after the election suggests that they will remain elevated for the foreseeable future.”
Since the Federal Reserve cut short-term rates by a half-point in September, mortgage rates have surged from 6.2 percent to 7 percent. As of November 7, according to Freddie Mac, the weekly average 30-year fixed mortgage rate was 6.79 percent, up 0.07 percent from a week earlier but down 0.71 percent from a year earlier.
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“Even with the Fed enacting an additional .25 rate cut today, it probably won’t have too much of an impact on mortgage rates in the short term,” Alvarez said.
“Rates are currently being guided by stronger-than-expected economic data, fears of inflationary policies surrounding tariffs and immigration with the new administration, and macro inflation fears specifically surrounding a potential widespread war.”
Alvarez expects rates to continue to come down in 2025, “but we might just have to be a little bit patient as to when, as it’s never a straight run down,” she said. “The Fed is being careful to maintain its impartial status and will likely continue with the plan to cut rates by an additional .25 at the next meeting in December.”
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Greg McBride, chief financial analyst at Bankrate, thinks that “even if mortgage rates begin to move back down, they’re still going to be at high levels.” For mortgage rates to fall in a meaningful and sustained way, he said, “there likely has to be an observable slowdown in the economy or investors have to come to grips with the prospects for increases in government debt.”
Marty Green, principal, Polunsky Beitel Green, told Newsweek in a written statement that the Federal Reserve’s ability to continue cutting interest rates in the future might depend on how the markets react to a President-elect Donald Trump’s second term.
“Although the Federal Reserve reduced its overnight fed funds rate by a quarter point as expected today, its second consecutive rate reduction was overshadowed by the Treasury bond and mortgage market reactions to Donald Trump’s victory in the U.S. presidential election,” Green said.
“While short-term rates have recently declined, longer-term rates like treasuries and mortgage-backed securities continued their march higher, as bond investors bet that some Trump pro-growth policies, if adopted, may have the unintended consequence of reigniting inflation. This scenario would limit the Fed’s flexibility to lower rates substantially down the road.”