2025 mortgage interest rate forecast

Rates hold 6.5%

Updated August 22nd, 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:

1. 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.
2. 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?

Mortgage rates stayed at their lowest levels of the year after Fed Chair Powell gave a dovish speech that hinted at the possibility of rate cuts. This optimism comes even as recent economic data shows tariffs are driving up prices and inflation, working against the effects of higher rates.

Economists caution that the full impact of tariffs will take time to show, likely appearing later this year as retailers work through older inventory. That means the market may be getting ahead of itself in celebrating a “Fed pivot.” Even if the Fed cuts by 0.25% in September, it may not signal a broader easing cycle. The Fed will keep weighing both inflation and labor conditions well into 2025 and 2026 before committing to a longer-term shift.

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-August. 22	Rate-August. 7	Change
30 Year Fixed	6.50%	6.50%	no change
30 Year Fixed – VA	6.00%	6.00%	no change
30 Year Fixed – FHA	6.125%	6.125%	no change
30 Year 7/6 ARM	6.375%	6.375%	no change
15 Year Fixed	5.75%	5.75%	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