When Will Mortgage Rates Go Down?

When Will Mortgage Rates Go Down?

Mortgage rates have been a hot topic for homebuyers, refinancers, and investors alike, especially as the economic landscape continues to shift in 2025. As of December 2025, mortgage rates have been fluctuating, and many prospective buyers are asking, When will mortgage rates go down?

While there have been some recent improvements, a dramatic drop is unlikely in the near future. Let’s take a closer look at the current trends, the forces driving mortgage rates, and what buyers can expect moving forward.

Understanding Mortgage Rates

When will mortgage rates go down? is a question that depends largely on a variety of economic factors. Mortgage rates are the interest rates charged by lenders when you borrow money to purchase a home. These rates can fluctuate, making it important for prospective buyers and homeowners to stay informed about current trends in mortgage rates and understand the forces that drive them.

The main factors influencing when mortgage rates go down include inflation, central bank policies, and the overall economic environment. These factors not only affect the rates you will receive but also your financial strategy for purchasing or refinancing a home.

What Affects Mortgage Rates?

Several key factors determine mortgage rates:

• Central Bank Policies: The Federal Reserve, the U.S. central bank, plays a key role in shaping mortgage rates. When the Fed raises or lowers the federal funds rate, it often has an indirect effect on mortgage rates. While mortgage rates are not directly tied to short-term rates, they tend to follow the broader trend set by the Fed. For instance, if the Fed lowers rates to combat inflation or stimulate the economy, mortgage rates often decrease as well.
• Inflation: Inflation is a major driver of mortgage rates. As inflation rises, the purchasing power of money decreases, and lenders adjust mortgage rates to account for the higher risk of lending in an inflationary environment. Conversely, when inflation slows down, mortgage rates often follow suit and drop.
• Economic Conditions: In times of economic growth, mortgage rates tend to rise as people are more willing to take on debt. However, during recessions or periods of economic uncertainty, the central bank may cut rates to stimulate borrowing, causing mortgage rates to fall as well.
• Treasury Yields: Mortgage rates are closely linked to the 10-year Treasury yield, which represents the return on government bonds. When the yield on 10-year Treasury bonds rises, mortgage rates typically increase. Conversely, when the yield drops, mortgage rates tend to follow. This relationship between mortgage rates and Treasury yields is a key reason why mortgage rates fluctuate.

The Current State of Mortgage Rates

As of December 4, 2025, mortgage rates have shown slight improvement, but they are still relatively high compared to the historical lows seen during the pandemic. According to Freddie Mac, the 30-year fixed-rate mortgage is currently at 6.19%, down slightly from 6.23% the previous week. This marks a 50 basis point drop compared to the same time last year, when the 30-year rate stood at 6.69%.

Similarly, the 15-year fixed-rate mortgage has decreased to 5.44%, marking the second straight week of declines. While these small improvements are welcome for homebuyers, it’s important to recognize that mortgage rates are unlikely to drop drastically in the near future.

So, when will mortgage rates go down significantly? The consensus is that while slight improvements are expected, mortgage rates are unlikely to fall drastically below 6% in the short term.

Why Mortgage Rates Aren’t Likely to Drop Below 6%

Despite the recent declines, mortgage rates are unlikely to fall significantly below 6% in the near future. Here’s why:

• Federal Reserve’s Actions: While the Federal Reserve has cut the federal funds rate twice in 2025, mortgage rates are more influenced by long-term Treasury yields than by short-term rate cuts. Even though the Fed’s actions have impacted short-term rates, mortgage rates have remained relatively stable due to the behavior of long-term bond yields. Unless there is a significant drop in Treasury yields, mortgage rates are likely to stay above 6%.
• Housing Market Conditions: The housing market remains tight, with home prices still climbing. For example, median home prices have risen from $208,400 in 2009 to $410,800 in 2025. This trend makes homes less affordable despite slight reductions in mortgage rates. As long as housing supply remains limited and demand stays high, home prices will likely continue to rise, counteracting any potential savings from lower mortgage rates.
• Bond Market Dynamics: Mortgage rates are also affected by the spread between mortgage rates and the 10-year Treasury yield. Currently, the spread is 2.10%, which is slightly smaller than it was a year ago, helping to bring rates down. However, this spread is still large enough that mortgage rates are unlikely to fall back to the ultra-low levels seen in 2020 and 2021.

What Experts Are Saying About Mortgage Rate Predictions

Several expert organizations have offered predictions about what mortgage rates will do in the coming years:

• Fannie Mae’s Housing Forecast predicts that the 30-year mortgage rate could decrease slightly to 5.9% by the end of 2026. However, rates are expected to remain relatively stable throughout 2027.
• The Mortgage Bankers Association expects the 30-year mortgage rate to hover around 6.4% throughout 2026, with only slight variations expected into 2027.
• The Federal Reserve may continue to adjust rates based on inflation and economic conditions, but experts agree that mortgage rates may not decrease dramatically in response. Even if the Fed cuts rates again, mortgage rates may not follow suit in a significant way.

Recent Forecasts for Mortgage Rates

Here are the most recent predictions regarding when will mortgage rates go down:

Should You Wait for Rates to Go Down?

Given the current economic outlook, it’s unlikely that mortgage rates will fall dramatically to the sub-5% range any time soon. While rates have improved, homebuyers should not wait for a significant drop before making a decision. It’s important to consider home prices, housing availability, and your financial situation when determining the best time to buy or refinance.

Instead of wondering when will mortgage rates go down, it is better to prepare yourself ahead. Here are a few strategies to consider:

• Lock In a Rate Now: If you find a mortgage rate that works for your budget, locking it in now may be a good idea. The market is volatile, and waiting for rates to drop further could result in missing out on a reasonable rate.
• Explore Alternative Financing Options: If mortgage rates are still too high for your budget, consider alternative options, such as a 15-year mortgage (which typically offers lower rates) or a rate buydown, where you pay upfront to secure a lower rate. Adjustable-rate mortgages (ARMs) can also provide lower initial payments, which may be beneficial if rates decline in the future or if you plan to move in a few years.
• Consider Smaller Properties: If home prices are a barrier, consider looking at smaller homes, condos, or properties that need renovation. This can help you navigate the current market and find a home that fits your budget.

Conclusion

Mortgage rates have decreased slightly but are unlikely to fall below 6% in the near future. With home prices still high, waiting for rates to drop significantly may not be the best strategy for many buyers.

Instead, focus on locking in a reasonable rate now and finding a property that fits your needs and budget. Although the market offers some relief, buyers should remain realistic about the challenges ahead and plan accordingly.