Mortgage Costs Stuck in High Gear: What to Expect in 2025
Mortgage costs have remained stubbornly high in 2024, with 30-year fixed rates holding above 6% for most of the year. Unfortunately, 2025 is unlikely to bring much relief for would-be buyers. Despite the Federal Reserve’s efforts to cut interest rates, which have made borrowing cheaper for loans, credit cards, and auto financing, mortgage rates have remained stuck.
The reason for this is that mortgage rates are closely tied to 10-year Treasury bond yields, which lenders use as a benchmark for long-term borrowing costs. With lingering concerns about inflation, driven by a strong economy and expectations of more deficit spending, investors demand higher returns on bonds. This leads to higher bond yields and, as a result, higher mortgage rates.
Donald Trump’s proposed higher tariffs on imported goods, which are always inflationary, is also pressuring mortgage rates. According to Doug Carey, a chartered financial analyst, mortgage rates could remain higher than expected in 2025.
The outlook for mortgage rates in 2025 is uncertain, with the Federal Reserve expected to further reduce its benchmark interest rate. However, these cuts may not be enough to significantly lower borrowing costs for homebuyers. Nevertheless, most forecasts predict 30-year rates will be lower than the current rate of 7.11%. Here’s a look at the latest projections for 30-year fixed mortgage rates in 2025 from leading financial institutions and industry organizations: