One of the biggest questions people are asking these days is when mortgage rates will drop. After a few years of rising rates and plenty of fluctuations throughout 2024, many of us are looking for some relief.

You know, when it comes to interest rates, it's tough to predict the future with 100% certainty. But the experts have been taking a close look at the latest forecasts, and they're sharing some insights on what we might see in the coming year. It's definitely worth paying attention to, even if the timing and exact numbers are a bit of a moving target.

Mortgage Rates Are Expected To Ease and Stabilize in 2025

After a period of significant fluctuations and ambiguity, the latest projections indicate that interest rates are expected to start stabilizing over the next 12 months, and may even experience a slight decline compared to their current levels (see accompanying graph).

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

““While mortgage rates remain elevated, they are expected to stabilize.””

— Lawrence Yun, Chief Economist at the National Association of Realtors (NAR)

Key Factors That’ll Impact the Future of Mortgage Rates

Forecasting mortgage rates is notoriously challenging in the housing market, as it depends on several key factors aligning. While rates are expected to dip slightly, they will remain a moving target, with the ups and downs of ongoing economic drivers likely to persist. A few of the factors that will influence where rates go from here include:

Inflation: is a tricky beast. If it starts to cool down, we might see a slight dip in interest rates. But on the flip side, if inflation stays high or even rises, those rates could remain elevated for a while longer. It's all about finding that delicate balance. The key is to keep a close eye on the economic indicators and be prepared for whatever comes our way.

Unemployment Rate: is a crucial factor that the Federal Reserve (the Fed) considers when making decisions. Although the Fed doesn't directly set mortgage rates, their actions are influenced by the overall state of the economy, which can ultimately affect mortgage rates.

Government Policies: The upcoming change in administration could have an impact on government policies, which in turn might influence how financial markets react and where interest rates go from there. Fiscal and monetary policies are likely to be areas of focus for the new administration, and their decisions could play a role in shaping the economic landscape.

These forecasts are based on the best information available right now. As new economic data comes out, experts will revise their projections accordingly. So, don't try to time the market based on these forecasts alone. Remember, these are just predictions - the actual market performance may end up being quite different.

Instead, the best thing you can do is focus on what you can control right now. Work on improving your credit score, put away any extra cash for your down payment, and automate your savings. All of these things will help you reach your homeownership goals even faster. Rather than worrying about factors outside your control, concentrate your efforts on the steps you can take today to get closer to buying a home. Improving your financial standing and saving consistently are proactive ways to make your dream of homeownership a reality, regardless of the broader market conditions.

Make sure to connect with a reliable agent and a lender. That way, you’ll always have the latest updates and expert insights on what they mean for your move!