Mortgage interest rates saw a slight decrease this week, but it wasn’t enough to offset the gains of the past three weeks. As of the week ending Jan. 9, the average rate on a 30-year fixed-rate mortgage dropped by four basis points to 6.93%, according to data from Zillow provided to BW. A basis point represents one-one hundredth of a percentage point.
Despite this slight dip, mortgage rates are still at their highest levels in six months. Rates on 30-year fixed-rate loans ended 2024 nearly one percentage point higher than their yearly low of around 6%, just before the Federal Reserve’s September meeting. Essentially, since the Fed began reducing short-term rates, mortgage rates have been on an upward trend.
So, where are mortgage interest rates headed next? With the new year underway, numerous experts have been analyzing data to forecast mortgage rates — let’s see what they have to say.
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Predictions from the Real Estate Industry
Economists at real estate firm Redfin provide a relatively conservative forecast. They anticipate rates to hover around the high sixes, averaging 6.8% throughout the year. This prediction is based on expected tax cuts and tariffs under the new administration. They mention that if these initiatives are scaled back or if the economy experiences a significant slowdown, mortgage rates could decrease.
On the other hand, experts at home search platform Realtor.com are much more optimistic about mortgage rates, projecting rates to average 6.3% and end the year at 6.2%. In a statement, Realtor.com’s chief economist Danielle Hale stated, “The trajectory of a Trump bump will depend on which campaign proposals become policy and when. For now, we anticipate a gradual improvement in housing market conditions driven by broader economic factors.”
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Predictions from Freddie Mac and Fannie Mae
At the government-sponsored enterprise Freddie Mac, economists anticipate rates to decline “very gradually” over the course of 2025. Over at fellow GSE Fannie Mae, the forecast goes into more detail. Fannie Mae economists project that 30-year rates will gradually decrease each quarter, reaching an average of 6.2% in Q4. However, they also acknowledge that these averages encompass potential significant fluctuations. Mark Palim, Fannie Mae’s senior vice president and chief economist, mentioned in a statement that “Increased mortgage rate volatility may present opportunities for prospective homebuyers to capitalize on temporary lows.”
Setting Realistic Expectations
While there are varying forecasts for rates, one common theme emerges: Experts do not foresee a significant drop in rates. Even the most optimistic projections place 30-year rates above 6%. This is relatively low in many respects — lower than the historical average mortgage rate of 7.72%, for instance — but it is notably higher than the exceptionally low rates observed in 2020 and 2021. If you are still benchmarking against 3%, it may be time to readjust your expectations.