Mortgage rates can change daily and even hourly.
Housing market forecasts haven’t changed much, with stubbornly high mortgage rates keeping prospective homebuyers on the sidelines. After the average rate for a 30-year fixed mortgage inched past 7%, it’s moving back down, but not by much.
Last week’s release of labor data showed the unemployment rate maintaining a status quo at 4.2%, which likely won’t cause enough alarm for the Federal Reserve to reduce interest rates at its upcoming policy meeting on June 17-18.
As we’ve highlighted in the past, a slowing job market would make it more likely for the central bank to lower borrowing costs. But even though official labor data appears stable, experts warn the worst is yet to come. Jobless claims and layoffs are increasing, signaling employer caution amid trade wars and ballooning government debt.
Inflation is expected to rise as domestic companies pass expensive duties onto consumers through higher retail prices. The Fed is facing a challenging balancing act between keeping inflation in check and keeping unemployment low.
“As long as the tariffs remain high, there will be a worry about persistently high inflation that the Fed cannot ignore,” said Chen Zhao, Redfin’s head of economic research.
Experts say the housing market is unlikely to change significantly in the coming months. With no clear consensus on what’s next for the economy or fiscal policy, mortgage rates have been in a holding pattern.
Prospective homebuyers should expect rates to remain near 6.8% for the remainder of 2025, according to Redfin’s forecast.
How the Fed will affect mortgage rates
Following signs of cooler inflation, the Fed cut interest rates three times in 2024, making borrowing costs slightly less restrictive. However, the Fed has held rates steady since then, waiting to see the long-term implications of the president’s policies before it lowers rates again.
The Fed’s actions don’t immediately dictate mortgage rates, but they indirectly influence how much it costs to borrow money across the economy.
Financial markets don’t expect interest rate cuts until September at the earliest.
“There’s way too much uncertainty as to what becomes of the tariffs, inflation and the broader economy,” said Keith Gumbinger, vice president at HSH.com. “There may be no cut at all if conditions don’t support it.”
Fewer interest rate cuts combined with the administration’s budget bill, which is expected to significantly raise deficits, are likely to keep upward pressure on longer-term bond yields. The 30-year mortgage rate closely tracks the 10-year Treasury yield, so rising bond yields translate to higher rates for home loans.
On the other hand, if the unemployment rate starts to climb due to the recent wave of layoffs, the central bank might consider cutting rates to avert a deeper downturn. That would put downward pressure on Treasury bond yields and mortgage rates.
How a recession could impact mortgage rates
In order for mortgage rates to drop significantly, the overall economic picture would have to get a lot bleaker, which isn’t great for those struggling to afford a home.
“The situation could change quickly if there are new announcements out of the Trump administration or if global economic conditions weaken,” said Lisa Sturtevant, chief economist at Bright MLS.
A recession isn’t a foregone conclusion, though it’s still a possibility. Joblessness is on the rise, consumer spending has slowed and economic growth declined in the first quarter of 2025. The prospect of a slowdown is weighing heavy on consumer confidence. Stagflation, an economic downturn marked by high inflation, is also a threat.
If lower mortgage interest rates are a by-product of a recession, buyers who are worried about job security and affording the high cost of living will be hesitant to take on mortgage debt.
“When people are anxious, they are less likely to make big decisions, like buying and selling a home,” Sturtevant said.
Tips from housing market experts
In today’s unaffordable housing market, prospective buyers have multiple reasons to postpone plans for homeownership. High mortgage rates and growing unease about economic instability have kept overall activity low.
“Given so many unknowns, it is a good time for caution. But if the market presents a potential homebuyer with a house they love and can afford, there’s little reason not to take advantage of the opportunity,” said Gumbinger.
Homeownership offers the promise of long-term financial stability and generational wealth-building through equity.
If you’re waiting for mortgage rates to come down before buying, keep in mind that the large-scale economic issues affecting the housing market are beyond your control. Instead, you can focus on the ways to bring down your individual mortgage rate, said Hannah Jones, senior research analyst at Realtor.com.
For example, shopping around for lenders can save borrowers up to 1.5% on their mortgage rate. Since each lender offers different rates and terms, you can always negotiate a better rate. If you’re financially ready to buy, you can always refinance your mortgage down the road.
Jones said other strategies for lowering your mortgage rate include improving your credit score, making a larger down payment or choosing a more affordable home.
Experts recommend making a homebuying budget and sticking to it. Creating a realistic financial plan can help you decide if you can handle the costs of homeownership and provide guidance for how large your mortgage should be.
Watch this: 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More
