Mortgage Rate Predictions for 2025: Are Rates Expected to Go Down in February?
The current forecasts for mortgage rates predict rates will remain elevated compared to where they were pre-pandemic. The Federal Reserve has signaled its intention to act cautiously in 2025 — potentially utilizing only two rate cuts — and this could mean mortgage rates have less reason to fall as we progress through the new year.
The market didn’t show a strong reaction to President Trump’s first few weeks in office, but turmoil in the bond market has been driving up mortgage rates over the last few months and could continue to do so.
Long term, high rates and low affordability will likely continue to keep the housing market sluggish in 2025.
Mortgage rates forecast for February 2025
In a best-case scenario, mortgage rates could fall closer to 6% at some point in 2025, but they aren’t expected to dip much lower than that — and rates could also go the other direction if the economy weakens or inflation rises.
President Trump’s recent call for lower interest rates at the World Economic Forum last month gave voice to many Americans’ desire for lower rates, but market experts expect Trump’s tariff, immigration and tax policies to continue affecting the bond market. Bond yields have been rising for more than four months, pushing up mortgage rates in turn.
The Federal Reserve also declined to cut interest rates at its latest meeting on Jan. 29. A cut would have given rates a little more incentive to move downward, but consumers aren’t likely to see significant rate drops with the Fed holding off.
It’s almost certain that rates will remain high compared to the levels seen during the height of the COVID-19 pandemic, when average 30-year mortgage rates were around 2.65%. Those record lows, as nice as they were, might not ever be seen again in our lifetimes.
How does the Federal Reserve affect mortgage rates?
→ A Federal Reserve rate cut directly affects adjustable-rate mortgages, since their interest rates are calculated using a number — known as an index — that fluctuates with the broader economy. The Fed’s cuts are to the federal funds rate, which is a benchmark index.
→ The Fed’s rate cuts indirectly impact fixed-rate mortgages, which can move more independently and, in some cases, can even move in the opposite direction of the federal funds rate. That said, when the federal funds rate drops, mortgage rates tend to follow. They can also drop in anticipation of a federal funds rate cut, as they did just before the Fed’s September rate cut.
Will home affordability improve in February?
Potential homebuyers shouldn’t expect significantly better affordability in February than they saw during most of the last few months.
Historically, February is fairly neutral: neither an especially cheap nor especially expensive month to buy a house. None of the best days of the year to purchase a home — the days on which you pay one of the lowest premiums — appear in February, according to an analysis by real estate data company ATTOM.
Unfortunately, the housing market continues to be prohibitively expensive for many Americans. Median home prices have risen by 24% in the last four years, landing at $419,200 in the fourth quarter of 2024. To put that in perspective, the national median monthly mortgage payment is a hefty $2,127, as of December 2024.
Takeaway: Even if we see a small rate dip in February, it won’t be enough to change the overall picture for most. Fueled by high home prices, low inventory and steep mortgage rates, today home affordability remains low and home sales are the slowest they’ve been in several decades.
Why is there a housing shortage?
High rates and the “mortgage rate lock-in” effect, which makes homeowners reluctant to sell, continue to drive up home prices. As of mid 2024, the average homeowner had a mortgage with a rate 2.5 percentage points lower than the current market rate. That’s why they’ll likely need to see rates come down further before feeling like it’s time to venture back into the market.
Home sales are picking up slowly, but remain low compared to 2024. Purchase volume was 7% lower than this same time last year, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey for the week ending Jan. 24, 2025.
Mortgage rates this week
Mortgage rates predictions for refinancing in 2025
Refinancing doesn’t make sense for most homeowners sitting on the low rates they locked in before 2022. That’s when the market began its march upward — moving ever further from the sanguine rates of 2021 which, even at their highest point, barely exceeded 3%.
So far, refinance application volume has been growing slowly over the course of 2025, overtaking last year’s January numbers by 16%, according to the MBA’s data. If 2024 was any indication, the number of homeowners refinancing could pick up relatively quickly — during the first week of October 2024, refinance applications shot up to 159% higher than the same week in 2023 and tapered down slowly, ending the year at only 10% higher.
Who does refinancing make sense for right now?
A refinance might make sense for some borrowers as long as they know exactly what benefit they’ll be getting out of it. For example, if you’re refinancing an adjustable-rate mortgage (ARM) to a fixed-rate loan, converting equity to cash with a cash-out refinance or getting a new interest rate that will lower your payments.
Should I wait to refinance after the Federal Reserve’s next interest rate cut?
If you can benefit from a refinance right now, it may make sense to act sooner rather than later. Plans to wait for a rate cut are likely to entail a long wait, as the Fed recently signaled that it intends to be very cautious about making further cuts.
Weigh how the savings you could achieve in the current market will affect you — if they’ll pull you back from the edge of financial desperation, it makes sense to act quickly. If you’d just like to save a little money, it could make sense to wait.
It’s typically smart to hold off on a refinance until you could get a rate that’s at least 50 basis points
Basis points are units used to measure changes in interest rates. One hundred basis points are equal to 1 percentage point, so 50 basis points are equal to 0.50%.
lower than the one you already have — and ideally 75 to 100 basis points lower.
Current refinance rates for this week
Will mortgage interest rates go down in 2025?
Although pandemic-related inflation took longer to cool than expected, it is cooling. In fact, it’s held near pre-pandemic levels for the last several months of 2024. Nonetheless, mortgage rates marched fairly steadily upward beginning in mid-September 2024. As long as Treasury yields remain elevated, mortgage rates will also stay high.
However, the Fed is very likely to hold rates steady in the short term rather than make cuts. Either way, the Fed’s actions may not be able to alleviate bond investor concerns about what the future may bring.
Ultimately, homebuyers should focus on what they can afford in the current market rather than obsessing over the future. It’s impossible to time the market, but borrowers only need to concern themselves with securing affordable monthly payments, not a “perfect” rate. And for now, getting into the market means making peace with a rate near 7%.
Will we see lower mortgage rates under the Trump presidency?
A new president doesn’t always have a notable impact on things like interest rates and inflation, but Trump and those around him have proposed privatizing Fannie Mae and Freddie Mac, imposing large tariffs, stripping the Fed of its autonomy and gutting the U.S. Department of Housing and Urban Development (HUD) — actions that would have major impacts on the housing market and the broader economy.
It’s unclear which of these policies will actually materialize, but mainstream economists anticipate that many of them would result in rising inflation. In fact, sixteen bipartisan, Nobel prize-winning economists signed a letter to this effect in June 2024. Higher inflation typically means higher home prices and higher mortgage rates, but — if the trend of elevated inflation persists — it can also mean that there won’t be a cheaper time to purchase a house in the near future.
How to get the best mortgage rates
1. Boost your credit score
Pay your bills on time, minimize your credit card balances and avoid opening several new credit accounts at once. You’ll get the best conventional mortgage rates with a credit score of 780 or higher.
Learn more about ways to boost your credit score.
2. Compare rates from multiple lenders
LendingTree data consistently show that consumers who shop around for mortgage rates typically save money. Get a loan estimate from three to five different mortgage lenders and compare the rates and terms you’re offered.
Learn more about our picks for the best mortgage lenders.
3. Consider paying points
A mortgage point costs 1% of your loan amount, and paying for points allows you to “buy” a cheaper interest rate. Read the fine print if you see an online rate that looks lower than what other lenders are offering — there’s a good chance you’ll pay points to get it.
Ready to see competitive rate offers on LendingTree?Frequently asked questions
If you can afford a mortgage and find a home that suits your needs, now can be a good time to buy, despite high rates and a limited number of homes for sale.
“Remember that timing the market is extremely difficult, if not outright impossible,” Channel cautions. “If you’re waiting to make a choice based on what you hope will happen instead of what’s already going on, you could end up missing out on a lot of good opportunities — even in today’s expensive housing market.”
“For there to be an outright crash, we’d need to see the housing market flooded with homes for sale, and that probably won’t happen as long as homeowners can continue to afford their mortgages,” Channel says. Homeowners seem well-equipped to keep making payments, as evidenced by data that show a shrinking foreclosure inventory and a low rate of serious delinquencies, he adds.
A mortgage interest rate is the base rate you’re charged to borrow money, but a mortgage annual percentage rate (APR) is the total cost of taking out a mortgage (the interest rate plus closing costs and fees). Both numbers are expressed as a percentage. For more details, check out our guide to distinguishing an APR versus interest rate.
The Federal Reserve’s monetary policy indirectly impacts fixed-rate mortgages, which are often tied to the 10-year U.S. Treasury bond yield. The Fed’s policies have a direct effect on loans with variable interest rates, including ARMs, credit cards and home equity lines of credit (HELOCs).
Haggle for a lower interest rate by using your mortgage offers as leverage. Ask each lender about matching your lowest quoted rate. Consider making a larger down payment, select an ARM loan with a lower initial rate or ask your lender about your mortgage buydown options.
Discuss mortgage rate lock options with your loan officer once you’re under contract on a home and moving through the application process. Rate locks usually last between 30 and 60 days, but they can be longer. Watch your expiration date — you may face a rate lock extension fee if your loan doesn’t close before your rate lock expires.
Mortgage rates dropped to a historical low of 2.65% in January 2021, when the Federal Reserve cut the federal funds rate to 0% to stabilize the post-pandemic economy.