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

FAQs

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

All three of the forecasts we looked at predict rates will continue to drop throughout 2025. The MBA sees rates ending next year at 6%, while Fannie Mae and NAR think rates will end up around 6.2% and 6.3%, respectively, by the end of 2025.

Mortgage rates are generally expected to fall throughout the rest of 2024 and 2025 as the Federal Reserve starts to lower interest rates. The Mortgage Bankers Association expects the average 30-year mortgage rate to reach 6% by the end of 2025.

Interest-rate forecast.

We project the federal-funds rate target range to fall from 5.25% to 5.50% currently to 4.75%-5.00% at the end of 2024, 3.00%-3.25% at the end of 2025, and 1.75%-2.00% by the end of 2026, after which the Fed will be done cutting.

WASHINGTON, DC – Following home price growth of 6.6% in 2023, a panel of housing experts forecasts annual national home price growth of 4.3% in 2024 and 3.2% in 2025, according to the Q2 2024 Fannie Mae (FNMA/OTCQB) Home Price Expectations Survey (HPES), produced in partnership with Pulsenomics, LLC.

New Outlook On Monetary Policy

The median projection for the benchmark federal funds rate is 5.1% by the end of 2024, implying just over one quarter-point cut. Through 2025, the FOMC now expects five total cuts, down from six in March, which would leave the federal funds rate at 4.1% by the end of next year.

$1.28 ↓-20.31% Estimated share price by August 6, 2025.

But all told, it's pretty fair to assume that there will still be opportunities to lock in a CD at close to 5% at the start of 2025. And there's a good chance you'll be able to open a CD at a rate of 4% or more for a good part of the year.

The panel of 29 forecasters assembled by The Conversation expects a further cut of 0.3 points by the end of 2025. This would take the cash rate down from the current 4.35 per cent to 3.75 per cent and produce a total cut in monthly payments on a $600,000 mortgage of $335.

However, increases should slow between 2024 and 2026, and rates may even decline in 2027. Among the factors that could impact mortgage rates in the next 5 years are inflation, Federal Reserve policy, and economic growth. Homebuyers should consider locking in a low mortgage rate now, as rates are expected to rise soon.”

The Fed will cut rates once in each quarter through 2025, taking the federal funds rate to the 3.75%-4.00% range by the end of 2025, according to median forecasts in the survey.

What is Fannie Mae's mortgage rate prediction? ›

The July Housing Forecast from Fannie Mae puts the average 30-year fixed rate at 6.7% by year-end, a slight decline from an average of 6.8% in the third quarter. All told, the mortgage giant predicts mortgage rates will average 6.8% in 2024 and 6.4% in 2025.

Lawrence Yun, chief economist at the National Association of Realtors, even told CNBC last year that he doesn't think mortgage rates will reach the 3% range again in his lifetime.

Still, rates might not fall as far as some homeowners hope, as forecasters previously baked in a September rate cut. In fourth quarter 2024 outlooks, Fannie Mae analysts anticipate 30-year rates at 6.7 percent, while the Mortgage Bankers Association predicts 6.6 percent.

The Mortgage Bankers Association (MBA) aligns closely with Fannie Mae's projections, predicting an average rate of 6.8% for the third quarter and 6.6% for the fourth quarter. MBA expects a further decline to an average of 6.4% in early 2025.

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.

While mortgage rates could fall in 2024, it's not a given. If you're risk-averse and want to avoid any chance of your mortgage rate increasing, locking in your mortgage rate today may be the best option. But if you think rates will drop before you make an offer, choosing not to have a rate lock could make more sense.

While 30-year mortgage rates moved down slightly in July, it's unlikely there'll be a meaningful drop beyond that if the economy continues its strong streak. Forecasters expect rates to land closer to mid-6 percent by the end of 2024, according to Bankrate's August mortgage rate outlook.

And as you might imagine, recessions are a risky time to buy a home. If you lose your job, for example, a lender will be much less likely to approve your loan application. Even if a recession doesn't affect you directly, if your area is hard-hit, that could have a serious effect on the local real estate market.

The auto loan rate forecast for 2024 suggests a cautiously optimistic outlook. While rates are not expected to plummet, there is potential for a modest decline as the year progresses, particularly if inflation continues to subside and the economy remains stable.

When inflation is running high, the Fed raises those short-term rates to slow the economy and reduce pressure on prices. But higher interest rates make it more expensive for banks to borrow, so they raise their rates on consumer loans, including mortgages, to compensate.