It’s late December so all the 2025 mortgage rate forecasts have been published. Unfortunately, all of them are already wrong.
Most housing market analysts expect mortgage rates to spend the year with a 6 handle. The most optimistic predictions assume 2025 will see mostly low 6s for the 30-year fixed rate mortgage. And yet with pesky inflation data not falling as quickly or as far as expected, Fed chair Jerome Powell suddenly changed his language in the Fed meeting on Dec. 19. The bond market got spooked and mortgage rates jumped back over 7%.
Rates could still ease down of course, and probably will at points during the year. But it’s notable that 2025 is about to start with mortgage rates in the 7s and almost none of the folks who forecast mortgage rates included a “7” in their forecast. They’re already wrong before the year even starts.
This scenario isn’t new, most forecasters got the mortgage trends for 2024 wrong too. In late 2023, the 30-year fixed rate mortgage neared 8%, the highest level in decades. At the time, most mortgage market observers expected that rates had reached their peak and would generally decline in 2024, stabilizing at perhaps 6% or lower by now. Unfortunately for homebuyers in 2024, mortgage rates have stayed higher for longer than anyone expected. Mortgage rates, as tracked by Freddie Mac, averaged 6.72% across the calendar year 2024.
But maybe forecasters will be less wrong this year. To their credit, for the most part forecasters seem convinced that rates will stay elevated during 2025. The consensus is that there are few catalysts that will allow mortgage rates to drop into the 5s. A year ago, there were plenty of forecasters who were imagining a 5 handle by the end of 2024. That never arrived and those chastened forecasters are less sanguine about next year.
The consensus view of mortgage rates for 2025
Even though the consensus is less optimistic than last year, even in this year’s outlooks, almost none of the forecasters — except HousingWire — published expectations for the range of rates to reach above 7% during the year. And yet at the end of 2024, that’s exactly where rates are. With recent inflation news and the Fed expressing less confidence in rate cuts in 2025, the momentum is for higher mortgage rates into the new year.
It can be a little tricky comparing apples-to-apples on forecast statements. Some forecasters state an average for the year, some frame a range with no average. Some are stated with quarterly expectations, others are annual. The economics team at NAR, for example, has stated assumptions of “near 6%” for the year. The Goldman Sachs strategists see, “above 6%” for the year. The economics team at Zillow expects rates to “be lower at the end of the year” with “plenty of bumps in the path.”
While still others, such as those from Realtor.com discuss an average for the year of 6.3%, ending the year at 6.2%.
We’ve compiled a table, with some interpretation from these official company statements into a single view in order to visualize comparisons. For companies that gave a range, we’ve interpreted the average for the year inside that range. For companies that used descriptive language, we’ve interpreted the range.
The HousingWire forecast for mortgage rates in 2025 is a range between 5.75% and 7.25%.
Some observers scoff at the wide 150 basis point range in our expectations for the year, as though it’s a cop-out. But our take is that the market is starting high and there’s a real risk of negative news that pushes rates above 7%. At the same time, if we’re lucky, a combination of beneficial macroeconomic news and tighter spreads might allow for a dip in rates under 6% at some point during the year. Because of big economic surprises, each of the last three years have had volatile mortgage markets with trading ranges of 350bp, 200bp and 140bp. We expect a similar volatility and rate range for 2025.
The low end of the range
For mortgage rates to spend the year “near 6%” that assumes easing inflation and softer jobs numbers. The bond market must be satisfied that the economy is cooling in order for rates to ease lower. These expectations have been common for three years now, maybe 2025 is when they finally come to fruition.
The low end of the forecast range also could benefit from decreasing mortgage spreads – the risk premium difference between the 30-year fixed rate mortgage and the yield on the 10-year treasury bond. Spreads have been elevated for three years and have been slowly declining in late 2024. The low end of the HousingWire forecast range (5.75%) includes a scenario where the yield on the 10-year drops to a recent low of perhaps 3.5% and the spread simultaneously eases lower to 225 basis points. That lucky combination would leave mortgage rates at 5.75%.
The high end of the range
Redfin has arguably the most pessimistic take on mortgage rates for the calendar year 2025. The economics team at Redfin has stated expectations of an average of 6.8% on the 30-year fixed for each quarter during the year. With a slightly lower average for the year, HousingWire’s upper end of the forecast assumes that mortgage rates could spend some time above 7% in 2025, possibly as high as 7.25%.
These bearish takes assume surprises with elevated inflation data or similar economic strength which occasionally spikes interest rates higher. As evidenced by the Fed’s December meeting, these spikes can happen quickly.
Expecting the unexpected
Mortgage rates finally eased down a bit in the third quarter of this year. But as the presidential election neared, that reprieve proved short lived. One of the difficulties of making a forecast like this is that there are infinite exogenous factors that drive the bond markets. At HousingWire, we can only assume those factors will surprise us, and that they’ll end up with mortgage rates in a wide trading range for the year. Recent events show how quickly any news can evaporate. 2025 promises to be a bumpy ride.
