Real Estate Interest Rates in 2025: What to Expect
As we move through 2025, mortgage interest rates remain a key concern for both homebuyers and sellers. Understanding market trends can help you make informed decisions. Here’s what experts, including those from the National Association of Realtors (NAR) and other economists, predict for this year.
Current Mortgage Rate Trends
As of January 9, 2025, the average 30-year fixed mortgage rate is 6.93%, slightly up from 6.91% the previous week. For a $400,000 home with a 20% down payment, this translates to a monthly mortgage payment of approximately $2,114.
What NAR Economists Are Saying
Lawrence Yun, Chief Economist at NAR, believes mortgage rates near 6% are the new norm. Historically, from 2016 to 2020, rates ranged between 4% and 5%, but a return to those levels is unlikely. Yun predicts that mortgage rates will remain just above 6% through 2025 and into 2026.
What Other Experts Are Predicting
Other economists have mixed views on home prices:
- The Mortgage Bankers Association expects a 1.3% increase in home prices this year.
- Fannie Mae predicts a 3.5% rise, although at a slower pace than before.
Despite steady mortgage rates, rising incomes could improve affordability. Additionally, newly built homes are being priced competitively, with a 2% price drop in 2024.
Will the Federal Reserve Cut Interest Rates?
Many expect the Federal Reserve to cut interest rates in 2025, but mortgage rates may not drop significantly as a result. While borrowing costs could decrease slightly, economists agree that rates will likely remain around 6%.
What This Means for Buyers and Sellers
With mortgage rates expected to hold steady, both buyers and sellers should stay informed:
- Buyers: Locking in rates sooner rather than later may help avoid potential increases.
- Sellers: Pricing your home competitively will be essential, especially as price growth slows.
While mortgage rates aren’t expected to drop dramatically, the market remains active. Whether you’re buying or selling, staying informed and working with a real estate professional can help you make the best decision.