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Despite daily fluctuations, the trend on 30-year fixed mortgage interest rates has been slowly falling through the first three months of this year. Experts say the falling rate could thaw the largely frozen housing market by enticing buyers off the sidelines.
Freddic Mac wrote in its guidance last week:
The decline in rates increases prospective homebuyers’ purchasing power and should provide a strong incentive to make a move. Additionally, this decline in rates is already providing some existing homeowners the opportunity to refinance.
According to Freddie Mac (FMCC-5.39%) data, rates on 30-year fixed mortgages peaked at 7.04 percent on January 16 and have been in decline since. They were at 6.63 percent on Thursday, March 13.
Marty Green, a principal at mortgage law firm Polunsky Beitel Green, says the current downward trend is more seasonal normality than anything.
“We are seeing a more normal spring market unfold as additional inventory and reduced interest rates have increased overall activity,” Green says, adding that so far the mortgage market moves and increased inventory seem to be constructive regarding a housing recovery.
“However, it is still too early to tell whether this recovery will have legs. If rates continue their latest downward trend, one could certainly envision an environment for activity in the housing sector to accelerate fairly deep into 2025,” Green says.
Too much economic uncertainty breeds housing uncertainty, bringing a mixed bag to mortgages.
“Certainly, the combination of prospective government cuts by DOGE and the disruptive impact of tariffs have made the mortgage bond market begin to price in additional cuts by the Fed later in 2025,” Green said, adding that a wildcard, however, is whether the tariffs reignite inflation, making further Fed cuts more complicated as it tries to balance its dual mandate of maximum employment and price stability.
Ultimately, Green says, the big unknown is whether, at some point, the same economic uncertainty currently having a positive impact on interest rates will actually cause the US economy to tip into recession.
“A recession, particularly one with significant job losses, could cause any housing recovery to fizzle fairly quickly,” Green says.
The Fed is scheduled to meet next week and experts believe they will hold rates steady. And the uncertainty will prevail until it doesn’t.
Uncertainty abounds in the mortgage market, and it’s difficult to predict what’s going to happen next for real estate, home buyers, and the mortgage market, says Melissa Cohn, the Regional Vice President of William Raveis Mortgage and a 43-year veteran of the mortgage industry.
“The current environment is a risky environment,” Cohn says. “We’re, in some ways, in new territory,” Cohn says.
While interest rates will likely be held steady next week, Cohn says a decrease can’t be ruled out.
“It’s very likely that the economy is slowing down as a result of everything that’s going on, and that the Fed will have a hard decision at their next meeting.” Cohn says, adding that if all of a sudden there is weakness spotted in the economy, that may force their hand to cut rates before they would like to.
