Mortgage forecasts for the week of January 27-February 2, 2025

Mortgage rates are always in flux, but homebuyers should expect it More disturbance than usual Over the next few months.

Since starting his second term, President Donald Trump has been making some progress Policies on immigration and tradewhich many experts see as inflationary.

“High tariffs and restrictive immigration policies matter,” he said Matt WalshAffordable Housing in Moody’s Analytics.

Average 30-year fixed mortgage rates About 7% remained steep For several weeks. While Trump has repeatedly claimed that he will lower mortgage rates to 3% (suggesting a… Severe economic crisis), the president does not set rates on home loans.

Even the Federal Reserve, which sets a benchmark short-term interest rate for lenders, only… It indirectly affects the mortgage market. Between September and December, the central bank cut interest rates three times, but mortgage Prices did not go down.

That’s because rates are primarily driven by movement in the bond market, specifically the 10-year Treasury yield. Bond yields and interest rates rise and fall depending on how… New economic data Policy changes shift market speculation and risk assessment.

now, Mortgage rates They remain high due to a combination of factors: “strong” economic growth; Potential inflationary policies under the new Trump administration; And the Fed’s less aggressive rate cutting path in 2025. In the first policy meeting of the year on January 28-29The central bank is expected to keep interest rates steady.

Mortgage rates will continue to fluctuate as investors speculate on what’s next. If inflation remains high or begins to rebound, mortgage rates will increase, regardless of the president’s promise to lower borrowing costs.

“On mortgage rates, we rely on data more than ever,” he said. Greg SherrBECOME DIRECT AND NFM LEDING.

Will the Fed meeting change mortgage rate expectations?

Given the slow progress in inflation and concerns about reheating, the Fed is expected to leave interest rates unchanged in the next few policy meetings.

“The earliest possible price reduction will be in March, and this assumes a convincing decline (inflation) in the two reports between now and then,” he said. Matt Graham From mortgage news daily. So far, though, most Investors are betting Another price cut won’t come until late spring or early summer.

The Fed will likely face pressure from the new president if additional cuts are not made. During a virtual appearance at the Davos Economic Forum on Thursday, Trump said he would Ask interest rates to fall Immediately.

“Interest rates probably do a lot better than they do, and I think I know that it’s certainly a lot better than the person who’s primarily responsible for making that decision,” Trump said in the Oval Office on Thursday. “If I disagree, I’ll let it be known.”

But there is Only so much Trump can actually do With regard to the central bank. Aside from expressing his views, the president’s most direct power over the central bank is through naming appointees to fill vacancies on the Board of Governors.

Similar to stacking the Supreme Court, the president can appoint members to the Federal Reserve Board whose views on monetary policy align with his own. However, the first Trump will be able to make any new appointments in early 2026.

Will mortgage rates fall in time for the spring home season?

Earlier last year, many economists optimistically predicted that interest rates would fall below 6% in early 2025. But since Trump’s re-election and the Fed’s announcement of less frequent policy easing in 2025, mortgage expectations have shifted higher .

Fannie Mae Now expect average 30-year fixed mortgage rates to hold above 6.5% through early 2025. Meanwhile, Moody’s Walsh forecasts mortgage rates to average just under 7% over the course of the year.

However, next month’s economic data can always change the equation. “If economic data starts to weaken, we may have already seen peak rates for this year,” he said. Logan Mohtashamiprincipal analyst at Housingwire.

At CNET 2025 Mortgage ForecastMohtashami noted that rates in the low 6% range are still possible in 2025. But that will be difficult to achieve, especially in time for the spring home season, if new economic policies recharge inflation or boost the government debt deficit.

A look at the 2025 housing market

today The housing market is unsustainable Results from higher mortgage rates, a Shortage of long-term housingexpensive house prices and loss of purchasing power due to inflation.

🏠 Low Housing Stock: A balanced housing market typically has five to six months of supply. Most markets today average about half that amount. according to Freddie MacWe still have a shortfall of about 3.7 million homes.

🏠 High mortgage Modifiers: In early 2022, mortgage rates bottomed out around 3%. As inflation rose and the Federal Reserve raised interest rates to tame it, mortgage rates more than doubled. In 2025, mortgage rates are still high, pricing millions of potential buyers out of the housing market.

🏠 Rate lock effect: Since the majority of homeowners Locked in mortgage rates Less than 5%, they are reluctant to give up low mortgage rates and have little incentive to list their homes for sale, leaving a dearth of resales.

🏠 House prices rise: Although demand for home purchases has been limited in recent years, home prices remain high due to a lack of inventory. It was the average price of a home in the United States $427,179 In December, up 6.2% year over year, according to Redfin.

🏠 Severe inflation: Inflation means an increase in the cost of basic goods and services, which reduces purchasing power. It also affects mortgage rates: When inflation is high, lenders usually raise interest rates on consumer loans to ensure a profit.

What homebuyers should know

It’s never a good idea to rush Buying a house Without knowing what you can afford, so create a clear budget for your home purchase. Here’s what experts recommend before buying a home:

💰 Build your credit score. Your credit score will help determine whether you qualify for a mortgage and at what interest rate. A Credit score A score of 740 or higher will help you qualify for a lower rate.

💰 Except for a larger down payment. greater Initial payment It allows you to take out a smaller mortgage and get a lower interest rate from your lender. If you can afford it, a down payment of at least 20% will eliminate private mortgage insurance.

💰 Shop for mortgage lenders. Comparing loan offers from multiple mortgage lenders can help you Negotiate a better rate. Experts recommend getting at least two loan estimates from different lenders.

💰 Consider leasing. choose for Rent or buy a house Don’t just compare your monthly rent to your mortgage payment. Renting offers flexibility and lower upfront costs, but buying allows you to build wealth and have more control over your housing costs.

💰 Consider mortgage points. You can get a lower mortgage rate by purchasing Mortgage pointswith each point costing 1% of the total loan amount. One mortgage point equals a 0.25% decrease in the mortgage rate.

More on today’s housing market