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Economists say mortgage rates aren’t likely to come down much this year after all, keeping many would-be homebuyers and sellers on the sidelines and chilling the prospects of a rebound in sales in 2025 from the lowest level in 30 years.
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Forecasts issued this week by Fannie Mae and the Mortgage Bankers Association reflect the runup in long-term rates during the fourth quarter of 2024 that’s continued this year.
Since hitting a 2024 low of 6.03 percent on Sept. 17, mortgage rates have climbed by a full percentage point, as bond market investors who fund most mortgages worry that Federal Reserve policymakers haven’t yet tamed inflation.
Rates for 30-year fixed-rate conforming mortgages climbed above 7 percent this month for the first time since May 2024, according to rate lock data tracked by Optimal Blue.
Forecasters at Fannie Mae now expect mortgage rates will come back down only gradually, to an average of 6.5 percent by the fourth quarter of 2025, and 6.3 percent by Q4 2026. Last month, Fannie Mae economists predicted rates on 30-year fixed-rate mortgages would fall to 6.2 percent by the end of this year and to 6.0 percent next year.
Mark Palim
“While we still see signs of resilience in the labor market, the higher mortgage rates that are associated with a growing economy will likely continue the affordability challenges faced by many potential homebuyers,” Fannie Mae Chief Economist Mark Palim said, in a statement. “Due to the ongoing lock-in effect and affordability constraints, we currently expect another year of sluggish existing home sales.”
The good news is that incomes are expected to rise faster than home prices and rents this year, and new homes are more available and priced competitively with existing homes in many markets, Palim said.
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