After hitting a peak of 7.04% in January 2025, mortgage rates have retreated, but the decline has been sluggish, as rates have remained stuck in the mid-to-upper 6% range.

The average 30-year fixed mortgage rate increased 17 basis points in April, landing at 6.81% to finish out the month, according to Freddie Mac data. One basis point is one one-hundredth of a percentage point. Rates saw a modest decline in early May.

Meanwhile, the Trump administration's tariff policies may lead to continued mortgage rate volatility, housing market experts say. They expect mortgage rates to remain stubbornly high, only gradually easing throughout the year.

Fed Votes To Hold Rates Steady Again Amid Economic Uncertainty, Tariffs

In a widely anticipated move, the Federal Open Market Committee (FOMC)—the Federal Reserve panel charged with setting interest rates—voted unanimously to keep the federal funds rate unchanged at its May two-day meeting. The federal funds rate is the overnight borrowing rate for commercial banks and credit unions and indirectly influences mortgage rates. 

After holding rates between 5.25% and 5.5% between July 2023 and August 2024, the Fed implemented three rate cuts between September and December 2024, totaling one percentage point. 

The May pause keeps the target benchmark range at 4.25% to 4.5% and marks the third consecutive meeting in 2025 where policymakers voted to keep the current rate.

The most recent Fed economic projections maintain the two rate cuts in 2025 that policymakers projected in the December forecast, making the expected range for the borrowing rate between 3.75% and 4% by the end of the year.

The Fed Is in 'Wait-and-See' Mode

"Patience" was Fed Chair Jerome Powell's mantra at a post-meeting press conference, stating that the substantial trade, immigration, regulation and fiscal policy changes that the new administration has begun to implement were still evolving,"and their effects on the economy remain highly uncertain."

Despite acknowledging larger-than-anticipated looming tariffs amid higher inflation and unemployment risks, Powell noted repeatedly the economy was "in a good position to wait and see," allowing the data-dependent Fed to await further clarity before making any adjustments to its policy stance.

In the meantime, Powell admitted, "We're really not at all clear what it is we should do."

What This Means for Mortgage Rates and Home Affordability

As the Fed began raising rates in March 2022 to wrestle runaway inflation down to its 2% target, the housing market felt the squeeze. Mortgage rates surged to decades-high levels as home prices hit historic peaks amid fierce demand and scant inventory, shutting the door on many would-be buyers. 

Though multiple factors impact mortgage rate movements, industry experts say affordability will likely remain a challenge for many this year, with the Trump administration's trade policies adding to the burden.

Namely, tariffs threaten to impact new home construction by pushing up costs on imported building material costs. National Association of Home Builders data indicates that new home prices are set to increase an estimated $9,200 on average, fueled by tariffs.

However, some experts suggest it's still possible to see some improvement in home affordability this year.

"If economic conditions stabilize and inflation continues to show signs of being under control, that may initiate a lower interest rate environment which could bring more housing inventory on the market," Rob Cook, vice president at Discover Home Loans, tells Forbes Advisor.

Will Mortgage Rates Drop in 2025?

So, given this swirl of economic uncertainty, where can we expect mortgage rates to go?

"[M]any economists expect mortgage rates will stay near their current levels for some time, possibly for most of 2025," Cook says. "Future rates will continue to be impacted by Federal Reserve decisions, inflation and employment data, and dynamics including home price trends." 

Other housing industry experts agree that we are unlikely to see much of a drop in mortgage rates this year.

"There are many unknowns on the horizon that outweigh what we know from current data and likely even the Fed's perspective on what we know," said Danielle Hale, chief economist, at Realtor.com, in an emailed statement. "As a result, mortgage rates are likely to remain in the high-6% range they've held for the last 6-plus months."

Should Buyers Wait for Rates To Fall?

Some experts caution that waiting for mortgage rates to drop further can be a risky strategy.

"For aspiring home buyers, the right time to buy really depends on your individual goals and financial situation," says Fred Bolstad, head of retail home lending at U.S. Bank. "If you are in the financial position to afford the payments on a home you find and love, there is no need to wait."

As it turns out, buyers who anticipated a mortgage rate drop last fall when the Fed began rate cuts didn't see the results they expected. This outcome served as a reminder that Federal Reserve rate decisions don't control mortgage rates.

"Note that when the Federal Reserve cut interest rates in September, again in November and December, mortgage rates actually increased," said Lawrence Yun, chief economist at the National Association of Realtors (NAR). "So people who were waiting to buy a home from the Federal Reserve decision—it completely backfired."

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What's Next?

The next two-day FOMC meeting is set for June 17-18. How likely are policymakers to cut rates?

"The Fed's statements after their meeting…highlighted uncertainty around inflation and economic growth," says Cook. "Given that, it appears likely the Fed will maintain their current wait-and-see approach by holding interest rates steady in June."

Other experts align with this view. Following the May meeting, odds for another pause at the June meeting were roughly 3-1, while Fed watcher forecasts for a first rate cut in July were approaching the same 3-1 margin.

Mortgage Rate Predictions for 2025

Here's how some experts predict market conditions will affect the average 30-year, fixed-rate mortgage in the second quarter of 2025 and beyond.

National Association of Home Builders (NAHB): 30-year fixed rate will average in the mid-6% range by the end of 2025

In his report highlighting key data from the April Macro Economic Outlook, Eric Lynch, economist at NAHB, offered this updated prediction: "As of April 10, the current Freddie Mac 30-year fixed-rate mortgage sits at 6.62%. While it will not be smooth, NAHB anticipates the 30-year mortgage rate to average around this rate by the end of 2025, and just above 6% by the end of 2026."

NAR: Mortgage rates will average 6.4% in 2025 and 6.1% in 2026

"So mortgage rates can go down with a Fed rate cut if inflation is under control," said Yun. "But it's not going to go down to 4% mortgage rate conditions because we have a huge national debt… It cannot go to 4%, and it cannot go to 5%, but it can go to 6% with the Federal Reserve rate cuts and calmer inflation."

Zillow Home Loans: Mortgage rates are on a bumpy path

"The future path of mortgage rates is uncertain, dependent on both economic data and headlines from the new administration's policies," writes Kara Ng, senior economist at Zillow, in the April Forecast. "While Zillow expects mortgage rates to end the year near mid-6%, barring any unforeseen shocks, that path might be bumpy."

Fannie Mae: Revises mortgage rate forecast downward

Per Fannie Mae's April Economic and Housing Outlook: "We forecast mortgage rates to end 2025 and 2026 at 6.2% and 6%, respectively, down from 6.3% and 6.2% in our prior forecast."

Freddie Mac: Expect rates to remain high in 2025

According to its January Economic, Housing and Mortgage Market Outlook, Freddie Mac expects mortgage rates to stay "higher for longer" this year, with the slightly lower rates compared to 2024 leading to a boost in refinance volume.

Mortgage Bankers Association (MBA): Rates will average 7% in the second quarter before receding

According to the MBA April Mortgage Finance Forecast, the real estate finance association upwardly revised its projection. The trade association now predicts the 30-year, fixed-rate mortgage to average 7% in the second quarter of 2025 (up from 6.8%), edging down to 6.8% in the third quarter (up from 6.7%) and ending the year at 6.7% (up from 6.5%).

BOK Financial: Expecting rates to stay high in the coming months

"Based on recent inflation concerns across the economy, the Federal Reserve does not sound interested in rate cuts anytime soon," says Michael Merritt, senior vice president of customer care and default mortgage servicing at BOK Financial and Forbes Advisor advisory board member. "As such, I expect rates to stay in the [high-6%-to-low-7%] range over the next few months —a similar range they have moved over the last month."

Jome: Mortgage rate movement will depend on Fed, economy

"When it comes to mortgage rates and inflation, beyond the usual impact of monetary policy and natural inflation trends, we may see additional inflationary pressure from potential tariffs on major trading partners," said Dan Hnatkovskyy, economist, housing market expert and CEO of Jome, a real estate company specializing in new construction home transactions. "This type of inflation could likely cause the Fed to pause rate cuts. … [B]ased on current trends and historical patterns, it seems unlikely that we'll see significant declines in Fed rates or mortgage rates this year, given the added inflationary pressures."

First American Financial Corporation: Elevated rates are staying put for a while

"A 'higher-for-longer' mortgage rate environment will continue to dampen house-buying power," says Mark Fleming, chief economist at First American. 

Bright MLS: Expect mortgage rates to bounce around in the coming months

"Mortgage rates are likely to jump around quite a bit over the coming months," predicts Sturtevant in recent commentary. "Buyers need to be prepared to work with a lender to be able to lock-in when rates do come down. While some buyers were hoping to wait for mortgage rates closer to 6%, it is likely that rates will still range in the mid-6% range at least into the summer."  

J.P. Morgan: Mortgage rates will remain above 6.5% in 2025

According to financial services firm J.P. Morgan's February outlook for the U.S. housing market in 2025, "The higher-for-longer interest rate backdrop is here to stay, with mortgage rates expected to ease only slightly to 6.7% by the year end."

Wells Fargo: Elevated mortgage rates to remain

Wells Fargo expects the mortgage spread between the 10-year treasury note yield and 30-year fixed rate mortgage to compress by the end of the year. "Accordingly, we look for the 30-year fixed-rate mortgage to recede from a bit under 7% at present to roughly 6.5% by the end of 2025."

Current Mortgage Rate Trends

Many industry experts forecasted this time last year that rates would be closer to 6% by the end of 2024 and drift below this threshold by the first or second quarter of 2025.

Here's how rates have trended over the past five years for 15- and 30-year mortgages.

When Will Be the Best Time To Refinance in 2025?

Whether 2025 emerges as an ideal year to refinance depends on several factors, including the number of times the Fed cuts interest rates and by how much. The mortgage rate you got when you initially financed your home is another major factor.

Refinance rates tend to be higher than purchase rates, but the two typically move in tandem, suggesting refinance activity could gain greater traction if rates continue their downward trend.

Should You Refinance If You Already Have a Good Rate?

Over 40% of U.S. mortgages were originated in 2020 and 2021, when interest rates were at record lows. There were also some 14 million mortgage refinances during the same time.

If you were lucky enough to secure a mortgage during that period, 2025 may not be the ideal time to refinance, considering mortgage rates could stay well above 6% in the coming months.

"Most homeowners refinance to reduce their monthly mortgage payments with a lower interest rate," wrote Archana Pradhan, an economist at CoreLogic, in a recent report. Pradhan adds that only about 12% of mortgage loans have a rate of 6% or more, many of which were originated in 2023 and 2024.

Recent Refinance Trends

In April, refinance activity started strong, but week-over-week activity sagged in the second half of the month. Year-over-year activity surged early in the month, but the momentum began to taper off as the weeks progressed. 

If the Fed postpones rate cuts again, as many expect, this could indirectly maintain upward pressure on mortgage rates, leading to a continued decline in refinance loans.

Here are recent trends in refinance activity, according to the MBA's Weekly Mortgage Applications Survey.

"Refinance activity dipped again, as mortgage rates remained close to 7%, and borrowers hold out for a bigger decline in rates," said Joel Kan, vice president and deputy chief economist at MBA, in an emailed statement. "Given the pullback in refinancing, the average loan size for refinances declined to just under $290,000, the lowest level in three months."

How To Shop for the Best Mortgage Rate

Getting an optimal rate on a home loan can save you a significant amount of money over time. Here are some tips that can help you get the best rate possible for your situation:

• Keep your eye on rates. Mortgage rates are constantly changing. Keeping a close watch will make it easier to find and lock in a better rate.
• Check your credit. When you apply for a mortgage, the lender will review your credit to determine your creditworthiness as well as your interest rate. In general, the higher your credit score, the better your rate will be. To get an idea of where you stand, check your credit before you apply and dispute any errors with the appropriate credit bureau to potentially boost your score.
• Shop around and compare lenders. Consider options from as many mortgage lenders as possible to find the best deal for you. Prospective buyers have saved more than $1,500 over a loan's term by getting two quotes from lenders and saved roughly $3,000 when they sought five quotes, according to Freddie Mac.

Frequently Asked Questions (FAQs)

Written By

Robin Rothstein

Staff Writer

Reviewed

Caroline Basile

Staff Editor