Rates drop to 5.99%
Updated September 17th, 2025
The chart above shows real interest rates locked for 30-year conventional loans for people with good credit by over 1,000 different lenders over the course of 2024, and the dotted line is our projected forecast for 2025 (rates looking like they’ll hold pretty steady around 6.875% at the wrap of each quarter).
The average rate, or 50th percentile, serves as a key marker for rate shoppers. It represents the point where half of borrowers locked in rates below and half locked in rates above, whereas the red worst line, shows the 95th percentile, or “rip off rates” that unfortunately some lenders will offer.
If this graph conveys one thing its that the most important thing homebuyers can do in 2025 to get a lower rate is to shop around between lenders.
2025 Outlook
| Quarter | Tomo prediction | Actual |
|---|---|---|
| Q1 2025 | 6.875% Est | |
| Q2 2025 | 6.875% Est | |
| Q3 2025 | 6.875% Est | |
| Q4 2025 | 6.875% Est |
2025… The market consensus is forecasting a slight drop in mortgage rates, from nearly 7% today to 6.5% by the end of the year. The Federal Reserve is signaling two rate cuts, but it’s important to remember that the Fed does not directly control mortgage rates. At Tomo, we believe the market is overly optimistic in its mortgage rate forecast and expect rates to end the year close to where they are now: 6.875%.
Key factors driving rates in 2025:
- The labor market: the labor market will continue to drive inflation outcomes and influence Fed policy. So far, it shows no signs of slowing down.
- Fiscal and regulatory policy: fiscal and regulatory actions will play a larger role in shaping mortgage rates than the Fed’s monetary policy. Key areas we are monitoring include:
- The prospect of mass deportations: this could tighten a labor force that has just returned to balance.
- The effect of tariffs: tariffs are inherently inflationary.
- The potential exit of Fannie Mae and Freddie Mac from conservatorship: this remains the largest wildcard outside the macroeconomy.
The odds of seeing mortgage rates dip into the 6s are not in favor. The latest Freddie Mac mortgage survey showed 30-year fixed mortgage rates at 6.91%. Historically, the odds of a drop of 0.91% or more from the first week of the year are slim—only about 25% of the time (13 out of 53 years) has this happened. Moreover, the risks for rates remain to the upside.
What happened with rates last week?
Rates came down a little bit further ahead of the September Fed Meeting, where as expected, the Federal Reserve cut interest rates by 25bps. In the September Summary of Economic Projections, the Fed highlighted the recent slew of economic data that has shown a weakening US economy as reason to lower short-term interest rates to support. They now expect to cut rates at each of the two remaining meetings this year.
Looking forward, Federal Reserve board members expect the economy to need more support via lower short-term interest rates than it had previously. While they expect inflation to continue to be a little above what is ideal, they are taking a proactive stance to address the latest labor reports and now view both sides of their dual mandate as equally risky.
We have a signal that the Fed is willing to roll up their sleeves and support the economy. Unfortunately, for homebuyers that means we will see a lot of volatility with rates, as the Fed has a tough job ahead of it. It’s anyone’s guess right now whether interest rates will be up or down on a given day. The bottom line is: if you’re thinking about buying, now is a good time to lock in rates – and may be your last chance to get a deal.
Our research shows it’s emotions not rates that are keeping buyers on the sidelines. Many have been waiting for rates to come down while at the same time believing rates won’t decline. Those who stay on the sidelines risk missing out as the market moves faster than sentiment does.
Current mortgage rates
You can see personalized rates on our current mortgage rates page (we promise they are real rates for real people).
| Product | Rate- September. 17 | Rate-September. 8 | Change |
|---|---|---|---|
| 30 Year Fixed | 5.99% | 6.125% | 0.135% decrease |
| 30 Year Fixed – VA | 5.5% | 5.625% | 0.125% decrease |
| 30 Year Fixed – FHA | 5.625% | 5.75% | 0.125% decrease |
| 30 Year 7/6 ARM | 6.250% | 6.255% | 0.005% decrease |
| 15 Year Fixed | 5.375% | 5.375% | no change |
2024 Lookback
| Quarter | Tomo prediction | Actual |
|---|---|---|
| Q1 2024 | 6.875% | 6.875% |
| Q2 2024 | 6.625% | 7.0% |
| Q3 2024 | 6.5% | 6.5% |
| Q4 2024 | 7.0% (revised from 6.375%) | 6.875% |
2024 marked the second consecutive year that began with market consensus forecasting a steep drop in interest rates as the year progressed. While I didn’t expect rates to fall into the 5s, I also anticipated a downward shift throughout the year. In August 2024, we experienced what I described as a “macroeconomic shift,” prompted by a notably weak Labor Market Report that seemed to provide the data the Fed needed for a true pivot. Unfortunately, that report turned out to be more of a blip than a lasting shift, with the U.S. economy once again demonstrating far more resilience than most had expected.
This potential shift was further undone by a red sweep in the November elections, with the incoming administration’s broadly pro-growth and pro-inflation policies. Mortgage rates—and all fixed income instruments—tend to drop when growth and inflation fall below expectations. Yet, despite all the movement throughout the year, mortgage rates ended 2024 exactly where they began: at 6.875%.
Next: Calculate Personalized Rates
One response to “2025 mortgage interest rate forecast”
Thanks Kyle,
Always such great informative information.