When the headlines say that mortgage rates are the lowest in months, that doesn’t always mean the drop was significant enough to shake up the housing market.
Despite the recent decline in average 30-year fixed mortgage rates — from above 7% to around 6.9%, according to Bankrate data — prospective homebuyers are playing the waiting game. For the week ending Feb. 14, mortgage applications declined to the lowest level since the start of 2025, dipping by 6.6%from the week prior, according to the Mortgage Bankers Association.
Buyers are still feeling constraints of low housing affordability, said Jason Walter, a member of CNET Money’s Expert Review Board who has over a decade of experience as a real estate agent. “US home prices are 3-5% higher than last year, and average 30-year fixed mortgage rates have been stuck near 7% for about two months,” said Walter.
While experts predict rates to move lower throughout 2025, it’s not going to be a dramatic decline. Fannie Mae expects average 30-year fixed mortgage rates to remain above 6.5% for most of the year.
Mortgage rates aside, prospective homebuyers are also contending with a long-standing housing shortage, high home prices and a loss of purchasing power due to inflation. Experts say many of the Trump administration’s policies, such as tariffs, could cripple housing affordability even further, putting upward pressure on interest rates and the cost of building materials, like lumber, used to build new homes.
What’s impacting mortgage rates this week?
For mortgage rates to fall substantially, especially in time for the spring homebuying season, there need to be signs of cooler inflation. This would open the door to more rate cuts by the Federal Reserve, but that doesn’t look likely right now.
Recent data show inflation rising by 3% on an annual basis, moving away from the central bank’s 2% target. If the Fed does decide to cut interest rates again, it’s unlikely to happen before the summer or fall.
Uncertainty surrounding new fiscal policies is also contributing to buyer hesitancy. The prospect of trade wars, mass deportations and a ballooning federal tax deficit could spark volatility in the bond market. The 30-year fixed mortgage rate (the most popular home loan term) is benchmarked to the 10-year Treasury note. Higher bond yields translate to higher borrowing costs on home loans.
“The good news for homebuyers, though, is that housing inventory is rising, and more homeowners are opting to list their homes for sale,” said Walter.
Where are mortgage rates headed in 2025?
Aside from day-to-day fluctuations, mortgage rates are expected to stay between 6.5% and 7% for a while. Those rates seem high compared with the 2% rates of the pandemic era, but experts say rock-bottom rates are unlikely without a severe economic downturn. Since the 1970s, the average rate for a 30-year fixed mortgage has been around 7%.
Here are some of the factors affecting mortgage rates today:
Trump’s economic policies: President Donald Trump’s potential tax cuts and tariffs are still a wild card for mortgage rates. Experts say such moves could stimulate demand, increase deficits and accelerate inflation. Mortgage rates are highly sensitive to fiscal policy and economic growth.
Fed rate cuts: While the central bank doesn’t directly set home loan rates, mortgage rates are indirectly influenced by the Fed’s policy decisions. If incoming data shows higher inflation and a strong labor market, the Fed will delay future rate reductions this year, which in turn would keep home loan rates high.
10-year Treasury yields: Average 30-year fixed mortgage rates closely track bond yields, specifically 10-year Treasury yields. If inflation and labor data continue to be strong, bond yields and mortgage rates will go up. The opposite will happen if unemployment rises or inflation cools and the Fed resumes cutting rates.
Investor expectations: Bond investors act in anticipation of what they believe will happen in the economy. The Fed’s outlook for future monetary policy determines investor trading strategy and risk assessment, which is why mortgage rates often jump or dip before interest rates are adjusted.
Geopolitical situations: Mortgage rates are affected by geopolitical events, including military conflicts and elections. Political instability can lead to economic uncertainty, which can result in more volatility with bond yields and mortgage rates.
Expert tips for homebuyers
It’s never a good idea to rush into buying a home without knowing what you can afford, so establish a clear home-buying budget. Here’s what experts recommend before purchasing 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 of 740 or higher will help you qualify for a lower rate.
💰 Save for a bigger down payment. A larger down payment 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 also 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 to three loan estimates from different lenders.
💰 Consider renting. Choosing to rent or buy a home isn’t just comparing monthly rent to a 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 buying mortgage points, with each point costing 1% of the total loan amount. One mortgage point equals a 0.25% decrease in your mortgage rate.
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