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If you’re hoping for mortgage rates to drop back to 5%, you’re not alone. Today’s higher interest rates have put homeownership out of reach for many Americans, forcing some buyers to pause their plans. While rates dipped briefly in September 2024, they quickly rebounded, leaving many buyers waiting for a more affordable rate environment.
But when could rates hit 5% again? The answer isn’t simple. Some experts foresee rates dropping in the next year or two, while others believe it might take longer. Either way, buyers are left wondering how to plan their next steps.
Here’s what experts predict about the path to lower rates and why waiting for the perfect rate might not be your best move.
Will Mortgage Rates Hit 5% Soon?
Experts suggest it could take some time for rates to fall to 5%.
David Druey, Florida Regional President of Centennial Bank, aligns with the Mortgage Bankers Association (MBA) forecast, anticipating rates may reach 5% in the second half of 2025. However, this is speculative, and several factors could shift the timeline.
Debbie Calixto, Sales Manager at loanDepot, emphasizes that the Federal Reserve’s upcoming decisions will play a major role.
“If the labor market weakens and inflation remains subdued, the Fed could implement measured rate cuts,” Calixto explains.
Low housing inventory is another complicating factor, keeping home prices high and putting additional pressure on rates.
Dean Rathbun, Loan Officer at United American Mortgage Corporation, points out that market stabilization could occur post-election, but predicting exact rate changes remains challenging.
What Could Push Rates Down Faster?
Certain economic factors could accelerate a drop in mortgage rates, including:
- The 10-Year Treasury Yield: Mortgage rates often follow declines in bond yields.
- Federal Reserve Rate Cuts: Although these primarily affect short-term borrowing, they can influence the broader mortgage market.
- Unemployment Trends: Rising unemployment typically leads to lower rates as investors seek safer options.
- Consumer Price Index (CPI): Lower inflation numbers often contribute to falling mortgage rates.
- Global Events: International conflicts or economic changes can impact inflation and, consequently, rate decisions.
Should You Wait for Lower Rates?
While waiting for lower rates might seem logical, experts caution against putting your homebuying plans on hold indefinitely.
“If you’re financially prepared to purchase and can handle the monthly payments, it’s worth moving forward,” Calixto advises. She highlights buyers who delayed during rising prices in 2020 and are now priced out of the market.
Rising home prices could offset any savings from a future rate drop, and refinancing remains an option when rates improve. Additionally, waiting too long could mean missing out on your dream home and the chance to start building equity.
The Bottom Line
Predicting when mortgage rates will hit 5% is tricky. While late 2025 is a possibility, market conditions could either speed up or slow down that timeline. As Rathbun notes, rates tend to fall much more gradually than they rise.
Instead of waiting for the perfect rate, consider meeting with lenders now to explore your options. They can help you understand your budget, lock in a rate that works for you, and outline refinancing possibilities down the road.
Remember, while mortgage rates are important, finding the right home for your needs and budget is the ultimate goal. Don’t let the dream of homeownership slip away while waiting for the “perfect” rate to arrive!
Written by Sharon Wu, a seasoned writer with over a decade of experience in home and finance topics.
Original article: When could mortgage rates hit 5% again? Experts weigh in – CBS News
