Mortgage rates fell below 3% in 2021 but are now over 6%, not expected to drop.

From Yahoo Finance: 2025-04-02 14:38:00

In 2021, the average 30-year mortgage rate fell below 3% but is now well over 6%, leaving potential homebuyers wondering when rates will drop back down. Experts anticipate rates to stay between 6% and 7% in 2025. Factors like inflation, unemployment, and Treasury yields influence mortgage rates.

Home loan interest rates reached historic lows in 2021 due to the Federal Reserve aggressively cutting rates to combat the economic effects of the pandemic. The average rate for a 30-year mortgage was 2.66% by late December 2020. However, rates are not expected to drop back down to 3% anytime soon.

Pandemic relief stimulus programs and lower interest rates led to increased consumer demand, driving the inflation rate up. By 2022, the PCE inflation rate was over 5%, prompting the Fed to raise rates 11 times in 2022 and 2023. Mortgage rates peaked at 7.79% in October 2023 before stabilizing around 6.6% by year-end.

To secure the lowest mortgage rate possible, consider improving your credit score, paying down debt, comparing multiple lenders, and negotiating fees. Timing the housing market can be challenging, so focus on finding the right home within your budget. Refinancing may be a good option if it results in lower interest rates or better loan terms.

While experts predict a slight decrease in mortgage rates in 2025, significant drops are unlikely. The average interest rate on a 30-year fixed-rate mortgage is well over 6%, with rates hovering around 6% to 7% since fall 2022. It’s essential to consider various economic factors when deciding to buy or refinance a home.

Read more: Will mortgage rates ever be 3% again?