Mortgage rates can change daily and even hourly.
After the average rate for a 30-year fixed mortgage crawled past 7% last week, it’s moving back down, but not by much.
Prospective homebuyers should expect rates to remain near 6.8% for the remainder of 2025, according to Redfin’s forecast.
“At this critical stage of the housing market, it is all about mortgage rates,” said Lawrence Yun, NAR chief economist, in a statement last week. “Lower mortgage rates are essential to bring homebuyers back into the housing market.”
Yet in order for mortgage rates to drop significantly, the economy would have to weaken, which isn’t great for those struggling to afford a home. On Thursday, jobless claims increased, confirming a softening in the labor market.
Friday’s release of unemployment data will have a ripple effect across financial markets. A weak jobs report is likely to heighten recession fears, encouraging investors to seek safer assets like bonds. The 30-year mortgage rate closely tracks the 10-year Treasury yield, and declining bond yields translate to lower rates for home loans.
If the unemployment rate climbs due to the recent wave of layoffs, the Federal Reserve might also consider easing policy to avert a downturn.
The Fed’s actions don’t dictate mortgage rates, but they indirectly influence how much it costs to borrow money across the economy. Lower borrowing rates could eventually make the mortgage market more attractive and accessible for buyers.
Most experts say the housing market is unlikely to change significantly in the coming months. Investors continue to weigh the unknowns of President Trump’s policies, particularly how austerity measures affect the job market and how tariffs impact inflation data.
Could a recession result in lower mortgage rates?
Mortgage rate dips are likely to be small and temporary in the coming months. Rates have been fluctuating in a narrow range because there is no clear consensus on what’s next for the economy or fiscal policy.
“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: Jobless claims are on the rise, consumer spending has slowed and economic growth declined in the first quarter of 2025. The prospect of an economic downturn is weighing heavy on consumer confidence.
Even if the by-product of an economy in freefall is lower mortgage interest rates, 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.
How can the Fed impact 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 been in a holding pattern since then, waiting to see the long-term implications of the president’s policies before it lowers rates again.
Economists have been cautioning that tariff-driven price bumps could incite stagflation and derail the Fed’s interest rate cuts until September or later.
“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.”
While recent economic data show some decline in official inflation figures, price growth is expected to go up as domestic companies pass expensive duties onto consumers in the form of higher retail prices.
“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.
Fewer interest rate cuts combined with the administration’s budget bill, which is also expected to significantly increase government debt deficits, could keep upward pressure on longer-term bond yields, directly impacting the mortgage market.
What do housing market experts advise?
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 you with some guidance for how large your mortgage should be.
Watch this: 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More
