{"id":184030,"date":"2025-07-28T14:36:32","date_gmt":"2025-07-28T20:36:32","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=184030"},"modified":"2025-07-28T14:37:14","modified_gmt":"2025-07-28T20:37:14","slug":"mortgage-rate-outlook-for-the-rest-of-2025","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/mortgage-rate-outlook-for-the-rest-of-2025","title":{"rendered":"The Mortgage Rate Outlook For the Rest of the Year and 2026"},"content":{"rendered":"\n

Mortgage rates have stayed stubbornly high in 2025, and while some people keep waiting for relief, I don\u2019t think it\u2019s coming as quickly\u2014or as dramatically\u2014as many hoped. We\u2019re now well into the second half of the year, and it\u2019s a good time to revisit what\u2019s going on, why rates remain elevated, and what I think will happen next.<\/span><\/p>\n\n\n\n

As of late July, the average 30-year mortgage rate is <\/span>sitting at around<\/span> 6.8%. That\u2019s down from the 7.15% we saw in January, and technically at a three-month low. But let\u2019s not kid ourselves: These are still high rates compared to pre-2022 levels, and they haven\u2019t dropped enough to restore transaction volume or make <\/span>cash flow<\/span><\/a> pencil out for most investors.<\/span><\/p>\n\n\n\n

I\u2019ve said this before, and I\u2019ll <\/span>say it again<\/span>: I expect mortgage rates to stay in the 6% range for most of 2025. Back in December, I predicted we\u2019d finish the year somewhere in the mid-6s, and that\u2019s still my base case. Sure, that\u2019s not what many others were forecasting\u2014they were more optimistic\u2014but if you zoom out and look at the bigger macro picture, this trajectory makes sense.<\/span><\/p>\n\n\n\n

Why Mortgage Rates Haven\u2019t Fallen<\/span><\/h2>\n\n\n\n

One of the biggest misconceptions I see online is that the Federal Reserve controls mortgage rates <\/span>directly<\/span>.<\/span> That\u2019s not how it works. The Fed sets short-term interest rates, but mortgage rates <\/span>are far more influenced<\/span> by the bond market, which <\/span>cares about<\/span> inflation, recession risk, and government debt levels.<\/span><\/p>\n\n\n\n

So far this year, we\u2019ve seen mixed signals. On the positive side, corporate earnings have held up, the labor market remains relatively healthy, and inflation hasn\u2019t surged. <\/span>But<\/span> on the downside, consumer sentiment remains shaky, debt delinquencies are <\/span>creeping up<\/span>, and <\/span>there\u2019s<\/span> been a noticeable <\/span>flight<\/span> from U.S. assets, <\/span>especially<\/span> long-term Treasuries.<\/span><\/p>\n\n\n\n

All this leads to a kind of economic tug-of-war. <\/span>Some investors fear inflation<\/span>; <\/span>others are more <\/span>worried<\/span> about a recession.<\/span> That uncertainty is keeping yields\u2014and by extension, mortgage rates\u2014stuck where they are.<\/span><\/p>\n\n\n\n

The Second Half of 2025: What Could Change?<\/span><\/h2>\n\n\n\n

Looking ahead, I\u2019m watching a few major macroeconomic forces that could shape the mortgage rate outlook.<\/span><\/p>\n\n\n\n

First, there are <\/span>tariffs<\/span><\/a>. They\u2019re a big deal, even if markets are under-reacting. These are effectively taxes paid by American businesses and consumers. <\/span>There was a brief import rush to front-load goods before the tariffs <\/span>hit<\/span> earlier in the year, but the inflationary impact is likely to <\/span>show up<\/span> in the months ahead.<\/span> This<\/span> could spook bond markets and keep yields elevated.<\/span><\/p>\n\n\n\n

Second is labor. The job market <\/span>still looks good overall<\/span>. Continued unemployment claims have ticked up, but initial claims remain low. That gives the Fed some room to maneuver, but it doesn\u2019t necessarily compel them to slash rates.<\/span><\/p>\n\n\n\n

And then there\u2019s the wild card: the Federal Reserve\u2019s leadership. Jerome Powell\u2019s term ends in February 2026, and President Trump has made it clear he wants someone else at the helm. We\u2019ve already seen open criticism and even discussions of firing Powell before his term ends. That kind of political pressure is unprecedented in modern U.S. history <\/span>and raises<\/span> serious questions about the Fed\u2019s independence.<\/span><\/p>\n\n\n\n

If a new Fed Chair is appointed\u2014someone like Kevin Hassett or Christopher Waller, who lean dovish\u2014we could see a more aggressive approach to rate cuts. But that doesn\u2019t necessarily mean mortgage rates will fall.<\/span><\/p>\n\n\n\n

The Fed Can Cut, But Will Mortgage Rates Follow?<\/span><\/h2>\n\n\n\n

Let\u2019s say the new Fed Chair cuts the federal funds rate. That affects short-term interest rates, <\/span>like<\/span> credit cards and car loans. But for mortgage rates\u2014which are tied more closely to the 10-year Treasury yield\u2014there\u2019s another story. <\/span><\/p>\n\n\n\n

If markets believe the Fed is cutting rates for political reasons or ignoring inflation risks, they may lose confidenc<\/span>e. <\/span>And when<\/span> that happens, long-term rates can <\/span>actually<\/span> rise.<\/span><\/p>\n\n\n\n

In other words, a rate cut could lower the cost of overnight borrowing, but push up the <\/span>cost<\/span> of 30-year loans if investors worry about inflation. <\/span>We <\/span>saw<\/span> this disconnect in late 2024, when the Fed cut rates by 1%, <\/span>and<\/span> mortgage rates <\/span>still went up<\/span>.<\/span> That\u2019s a perfect example of how deeper macroeconomic forces can overpower Fed policy.<\/span><\/p>\n\n\n\n

Forecasts and My Outlook<\/span><\/h2>\n\n\n\n

Most major forecasters agree: We\u2019re not going back to 3% or 4% mortgage rates anytime soon. Fannie Mae projects rates to hover around 6.7% this year, dipping slightly to 6.5% by <\/span>Q4<\/span>. The Mortgage Bankers Association and National Association of Home Builders (NAHB) share similar views\u2014mid-6s, maybe high-5s if we\u2019re lucky.<\/span><\/p>\n\n\n\n

I\u2019m holding steady with my forecast: 6.4% to 6.9% through the rest of 2025. Even if the Fed cuts rates modestly, I don\u2019t expect mortgage rates to respond dramatically. <\/span>The bond market <\/span>just<\/span> isn\u2019t<\/span> set up for a <\/span>major<\/span> decline in yields <\/span>right now<\/span>.<\/span><\/p>\n\n\n\n

Let\u2019s talk about why.<\/span><\/p>\n\n\n\n

Long-Term Debt Is Keeping Rates High<\/span><\/h2>\n\n\n\n

The U.S. government is drowning in debt. The national debt was reset to $36 trillion in early 2025, with almost $29 trillion of that publicly held. This massive debt load means the Treasury has to issue more bonds to finance spending, which increases supply and forces yields higher to attract buyers.<\/span><\/p>\n\n\n\n

At the same time, interest payments on the debt are exploding. By the end of this year, we could see interest consume nearly 18% of federal <\/span>revenues\u2014<\/span>more than double what we were spending just a few years ago.<\/span><\/p>\n\n\n\n

This<\/span> creates a vicious cycle: <\/span>More<\/span> debt means higher interest payments, which <\/span>leads<\/span> to more debt issuance, <\/span>which raises<\/span> rates <\/span>further<\/span>.<\/span> Investors are now demanding higher term premiums\u2014<\/span>basically<\/span> extra compensation\u2014for holding long-term U.S. debt. And because mortgage rates <\/span>are closely tied<\/span> to long-term Treasuries, this keeps borrowing expensive.<\/span><\/p>\n\n\n\n

Could QE Come Back?<\/span><\/h2>\n\n\n\n

One theoretical way to bring rates down would be to restart quantitative easing (QE), where the Fed buys bonds to push yields lower. But that comes with enormous risks. If investors perceive this as the Fed \u201cprinting money\u201d to help the government or juice the economy before an election, we could see a complete loss of market confidence.<\/span><\/p>\n\n\n\n

That would likely backfire. Instead of rates falling, they could spike as investors dump Treasuries or flee to inflation hedges. Credibility is everything for the Fed. Once it\u2019s lost, it\u2019s <\/span>very hard<\/span> to get back.<\/span><\/p>\n\n\n\n

My Advice for Investors<\/span><\/h2>\n\n\n\n

If you\u2019re buying real estate or <\/span>refinancing<\/span><\/a> in 2025, plan for mortgage rates in the 6% range. I don\u2019t see a sharp drop coming. <\/span>Yes, there\u2019s always a chance for <\/span>some upside<\/span> surprise, and if rates fall more than expected, you can always refinance later.<\/span><\/p>\n\n\n\n

But I wouldn\u2019t bet your entire strategy on rates going down. Make deals work in today\u2019s environment. <\/span>Fixed-rate debt <\/span>is still<\/span> a <\/span>good<\/span> hedge against uncertainty, and real estate investors who <\/span>stay<\/span> active, flexible, and informed <\/span>are going to<\/span> be in the best position, <\/span>no matter<\/span> what happens next.<\/span><\/p>\n\n\n\n

Hope for the best\u2014but plan for the mid-6s to be the new normal.<\/span><\/p>\n\n\n\n

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Mortgage rates have stayed stubbornly high in 2025, and while some people keep waiting for relief, I don\u2019t think it\u2019s coming as quickly\u2014or as dramatically\u2014as many hoped. We\u2019re now well […]<\/p>\n","protected":false},"author":108611,"featured_media":184033,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-184030","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/184030","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/108611"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=184030"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/184030\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/184033"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=184030"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=184030"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=184030"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}