Mortgage rates likely to linger above six percent into next year
Analysts disagree on the timing and magnitude of any decline in mortgage rates, with the Mortgage Bankers Association expecting little change and Fannie Mae forecasting a modest retreat. This matters because elevated rates combined with near doubling in median home prices since 2009 are keeping monthly payments high and limiting market mobility for many buyers.
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Mortgage rates have been stubbornly resistant to relief, and forecasters say substantial declines are unlikely in the near term. The Mortgage Bankers Association in its October outlook projects the 30 year fixed mortgage rate will hold at 6.4 percent through 2026 and only edge down to 6.3 percent by the end of 2027. By contrast, the October Fannie Mae Housing Forecast offers a more upbeat scenario, predicting rates will fall to 5.9 percent by the end of next year. Both projections, however, agree that mortgage rates will remain above 6 percent throughout 2025.
The recent behavior of market yields underscores why forecasters are split. Freddie Mac data for the 52 weeks ending November 13, 2025 show the 30 year fixed rate ranged between 6.17 percent and 7.04 percent, while the 15 year fixed rate moved from 5.41 percent to 6.27 percent. Those ranges indicate that while rates have pulled away from their highs, they have not returned to the lows that would meaningfully revive refinancing activity or dramatically expand affordability.
Longer term trends compound the problem for prospective buyers. According to the Federal Reserve Bank of St. Louis, the median sale price of single family homes was $208,400 in the first quarter of 2009 and had risen to $410,800 by the second quarter of 2025, an increase of roughly 97 percent. That near doubling of nominal prices, combined with mortgage rates stuck above 6 percent, places mortgage payments well above levels seen in the decade after the last recession.
How much rates move will hinge on several macroeconomic forces. Mortgage rates typically follow the trajectory of longer term Treasuries and the yields on mortgage backed securities, which in turn react to inflation trends and the Federal Reserve's policy stance. If inflation eases materially and the Fed is able to cut short term interest rates, market yields could fall and provide room for mortgage rates to drift lower. Conversely, persistent inflation or a surprise tightening of financial conditions would keep upward pressure on borrowing costs.
The market implications are clear. Elevated rates reduce purchasing power and keep refinancing activity muted, weighing on home sales and slowing turnover. That dynamic can limit supply because existing homeowners facing higher mortgage rates frequently choose to stay put rather than trade up. For policymakers, the challenge is balancing measures to restore affordability with the Fed's mandate to control inflation. Any significant policy shift will require clear evidence that inflation is on a durable downward path.
For now, the most probable outcome is a modest easing in mortgage rates rather than a sharp drop. The difference in forecasts between the Mortgage Bankers Association and Fannie Mae reflects uncertainty about inflation, central bank action, and the health of credit markets. Homebuyers and sellers should plan on elevated financing costs for the coming year, and monitor inflation data and Fed signals if they are timing transactions around potential rate improvements.
