Mortgage rates to stay above 6% through 2025, Fannie Mae says (2024)

Fannie Mae has lifted its forecast for mortgage rates from just a month ago, saying rates will stay higher for longer than they previously thought — and fewer homes will be sold than they expected in 2024.

The government-backed organization said in its February forecast that it expects the average rate for a 30-year fixed mortgage to drop below 6% by the end of the year to 5.9% in the fourth quarter.

Now, Fannie Mae expects rates to be a half-percent higher (6.4%) by the end of this year, and remain above 6% for another two years, gradually declining to a flat 6% by fourth-quarter 2025.

Mortgage rates to stay above 6% through 2025, Fannie Mae says (2)

A "For Sale" outside a house in Hercules, California, on May 31, 2022. (David Paul Morris/Bloomberg via / Getty Images)

Freddie Mac's latest data shows the average rate for a 30-year fixed mortgage is currently around 6.74%. After peaking at 7.79% in late October, rates steadily declined until mid-January when they reversed course and began marching back up.

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Rates have fallen slightly for the past few weeks, but economists do not expect them to drop significantly any time soon. Sam Khater, Freddie Mac’s chief economist, said last week, "In this environment, there is a good possibility that rates will stay higher for a longer period of time."

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"The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024," Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement announcing the increase in mortgage rate expectations.

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"Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we'd previously forecast, as markets continue to evolve their expectations of future monetary policy," he explained.

Mortgage rates to stay above 6% through 2025, Fannie Mae says (4)

A housing development in Trappe, Maryland, on Oct. 28, 2022. (Jim Watson/AFP via / Getty Images)

"Still," he added, "while we don’t expect a dramatic surge in the supply of homes for sale, we do anticipate an increase in the level of market transactions relative to 2023 — even if mortgage rates remain elevated."

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Fannie Mae said the change to its mortgage rate outlook was the principal driver of a downward revision to its total home sales forecast. The organization now expects 4.91 million home sales in 2024, down from 5 million, and 5.4 million sales in 2025, down from 5.54 million.

Mortgage rates to stay above 6% through 2025, Fannie Mae says (2024)

FAQs

Mortgage rates to stay above 6% through 2025, Fannie Mae says? ›

Now, Fannie Mae expects rates to be a half-percent higher (6.4%) by the end of this year, and remain above 6% for another two years, gradually declining to a flat 6% by fourth-quarter 2025. Freddie Mac's latest data shows the average rate for a 30-year fixed mortgage is currently around 6.74%.

What are mortgage rates expected to be in 2025? ›

The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.

What will the mortgage rate be in the next 5 years? ›

Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.

What are mortgage rates projected to be in 2027? ›

They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.

What are mortgage interest rates expected to be in 2026? ›

The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.

What will the mortgage rates be in 2024 and 2025? ›

Mortgage rates are currently expected to continue trending down through 2024 and into 2025. The Mortgage Bankers Association thinks that 30-year mortgage rates could fall to 5.6% in 2025.

What will mortgage rate be in 2024 2025? ›

That means the mortgage rates will likely be in the 6% to 7% range for most of the year.” Mortgage Bankers Association (MBA). MBA's baseline forecast is for the 30-year fixed-rate mortgage to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.

Will interest rates go down in 2025 mortgage? ›

Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."

Will mortgage rates go down in the next 3 years? ›

Other mortgage rate forecasts

Fannie Mae, the Mortgage Bankers Association and National Association of Realtors predict that mortgage rates will gradually descend in 2024, to around 6% in the final three months of the year.

Will interest rates ever go back to 3? ›

The bottom line

Sure, mortgage rates could fall to 3% at some point, but chances are that's not going to happen anytime soon. Moreover, waiting for rates to drop before you buy your home could backfire. Instead, consider buying your house now and refinancing your mortgage when rates improve.

What will the interest rate be in 2030? ›

Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.

What will CD rates be in 2025? ›

"Shorter CD rates won't collapse and will still offer far higher yields than the ones we experienced in 2021 and prior years," Krumpelman says. "Even in 2025, we expect short CDs to pay more than 3%."

What are the predictions for mortgage rates? ›

If inflation continues to come down over the next few months, mortgage rates should also fall as lenders will be anticipating the base rate to be cut - the first cut is expected in June 2024. However, it's likely we won't see sub-4 % mortgage deals as standard until the end of 2024 or even longer.

What will the 15 year mortgage rate be in 2026? ›

Mortgage Interest Rate predictions for July 2026. Maximum interest rate 3.79%, minimum 3.57%. The average for the month 3.67%. The 15 Year Mortgage Rate forecast at the end of the month 3.68%.

Will rates be lower in 2026? ›

Driving the news: The median Fed official now expects interest rates to be somewhat higher in 2025 and 2026 than they did in December — anticipating fewer rate cuts will be justified in the coming two years. The median projection for the longer-run rate also ticked up, to 2.6% from 2.5%.

Will the interest rates go down in 2026? ›

Beyond the 35 percent of economists who expect rates to stay high through the end of 2026, 1 in 4 economists (24 percent) see rates holding above 2.5 percent until the end of 2025, while a smaller share (12 percent) see rates sticking at a restrictive level until the end of 2027 or later.

Will mortgage rates go down in 2025? ›

Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."

Do mortgage rates go down in a recession? ›

For people looking to buy a home, a recession can bring some advantages. When the economy is not doing well, home prices often drop, which can be good news for those who want to find a good deal; plus, during recessions, mortgage rates usually stay low, meaning buyers can get a home with lower monthly payments.

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