2025 Mortgage Rate Forecast

16 January 2025by Jane Carhart0

2025 Mortgage Rate Forecast: Insights from Economist Matthew Gardner

As we step into 2025, questions about the direction of mortgage interest rates are on every homeowner’s and buyer’s mind. While no one has a crystal ball to predict the exact trajectory of rates, Economist Matthew Gardner offers some valuable insights that help shed light on where the market may be headed.

Washington Homeowners Are Rate-Locked

Currently, Washington State remains in a “rate-locked” scenario, with 79.1% of homeowners holding mortgage rates at or below 5%. A significant portion of these homeowners—38.7%—are sitting comfortably with rates between 3.01% and 4%, and an additional 25.9% have locked in rates at or below 3%. This is great news for those already in the market, but it does present challenges for buyers, as many homeowners are hesitant to sell and give up their historically low rates.

Where Are Rates Headed in 2025?

According to Matthew Gardner, the forecast for 30-year conventional mortgage rates looks promising. After a period of turbulence in 2024, rates are expected to stabilize and trend modestly downward throughout 2025. Here’s the projected outlook:

  • Q1 2025: Rates are expected to hover around 6.7%.
  • Q2 2025: A slight dip to 6.5%.
  • Q3 2025: Rates could level out at 6.4%.
  • Q4 2025: The year is forecasted to close with rates remaining at 6.4%.

These modest reductions signal a steady improvement, though not a dramatic drop. Gardner also emphasizes that while inflationary pressures may continue to create some volatility, a resurgence of inflation is not anticipated. This should help keep rates on a downward path.

What Does This Mean for Buyers and Sellers?

For buyers, the slight decline in rates could improve affordability later in the year, especially for those who have been waiting on the sidelines. However, it’s essential to keep in mind that inventory may remain tight, given that so many homeowners are “rate-locked” into historically low mortgages.

For sellers, 2025 could still be an excellent time to list. While rates may not fall dramatically, buyer demand is expected to remain strong, particularly in desirable areas like Bainbridge Island. If you’re considering selling, now is the time to start preparing your home for the market.

Navigating the Market in 2025

Whether you’re looking to buy, sell, or simply explore your options, understanding market trends and forecasts is crucial. While interest rates are only one piece of the puzzle, their impact on affordability and market activity cannot be overstated.

If you’re ready to make a move or have questions about the real estate market on Bainbridge Island, feel free to reach out to me! Let’s strategize to ensure you’re making the most informed decisions in 2025.

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Jane Carhart, Global Real Estate Advisor
Realogics Sotheby’s International Realty
License #: 133301
Call: (307) 413-8961

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