Mortgage interest rates may change this fall, depending on various evolving factors.
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The housing market over the past few years has been challenging for prospective homebuyers. As home prices and mortgage interest rates remain high, first-time homebuyers face a one-two punch, making it difficult to break into real estate and get a place of their own.
Average mortgage interest rates are 6.58% on a 30-year fixed-rate mortgage as of August 21, based on Freddie Mac data. While that rate was flat from the week before, overall, the summer brought some welcome news: a mortgage interest rate drop. At the start of summer, mortgage rates stood at 6.85%, marginally higher than where they are now. But where are mortgage rates headed for fall?
The Federal Reserve is meeting again in September to discuss the future of the federal funds rate, to help manage inflation and employment, which could have an impact on mortgage rates. We spoke to several mortgage experts about the mortgage interest rate forecast for fall 2025 and what to expect.
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What's the mortgage interest rate forecast for fall 2025?
Whether mortgage rates rise or drop depends on various factors. Here's what might impact mortgage rates this fall and what experts forecast about where they're headed:
Understanding mortgage rates and the Federal Reserve
Due to persistent inflation, the Federal Reserve has maintained the federal funds rate at its current level throughout 2025. But the September meeting could finally see some movement and be a game-changer. Questions about what the Federal Reserve plans to do next have continued for months and answers seemed uncertain.
However, recently, the Federal Reserve Chair Jerome Powell hinted that there could be a rate cut in September, as the agency considers its strategy to balance employment and inflation. Current projections from the CME Group's FedWatch tool show that there's a higher likelihood of a rate cut than not. If the Fed does lower rates, will mortgage rates follow? Not necessarily.
"In some ways, a September rate cut has been baked into the market. I believe that it is likely the Fed will cut rates by .25% in September…Overall employment data continues to suggest an economic slowdown, and I think there is currently enough data to support this cut heading towards the new year," says Sarah DeFlorio, the vice president of mortgage banking at William Raveis Mortgage.
When the Federal Reserve reduces the federal funds rate, interest rates on many borrowing products tend to drop as well. But mortgage rates don't necessarily follow the same formula. The 10-year Treasury yield also has an impact.
"The Federal Reserve's September rate decision could have a slight impact on mortgage rates. While many people assume they are closely connected, mortgage rates typically follow the bond market," says Rose Krieger, senior home loan officer at Churchill Mortgage.
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Mortgage interest rate drops could come later
The experts we spoke to believe that mortgage rates aren't likely to fall at all or much, even if the Fed cuts rates in September. But the mortgage interest rate forecast for the rest of the fall may be more promising.
"We don't anticipate any real improvement in rates with the September cut. We still have October and December, which we're hoping and assuming will be additional cuts, which have not yet been factored into the market," says Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank.
If average mortgage rates are now 6.58% where will they land later in the fall? Krieger says, "Fannie Mae projects that mortgage rates will be around 6.5% by the end of the year. Their projection for 2026 is 6.1%, so a slight decrease in rates is to be anticipated, but not expected."
Shayowitz believes the mortgage interest rate forecast could be more significant. "In the fall, September, October, November, December, certainly the last quarter of 2025, I'm assuming that we will see rates close to the 6% marker," adds Shayowitz.
What might happen if there's a mortgage interest rate drop?
If there is a mortgage interest rate drop, the homebuying landscape could change significantly. "I do believe that 6% is a huge psychological barrier…and certainly if rates dip down below 6%, which I do believe and anticipate they will towards the end of the year, then you're going to have a flood of buyers," says Shayowitz.
Lower mortgage interest rates have a positive impact on borrowers, who may have lower monthly payments and save on interest charges throughout repayment. That could be a major win for prospective homebuyers. But if you're waiting specifically for rates to go down, it could also potentially backfire because of higher demand.
"A lot of people are waiting for rates to drop so that they have more favorable rates in order to purchase homes. The problem is it's a double-edged sword, because as rates continue to drop, you will have more people entering the market who have been on the sidelines who want to buy and that will actually just push prices up," adds Shayowitz.
The bottom line
If you're wondering whether there will be a mortgage interest rate rise or drop, time will tell. The mortgage experts we spoke to believe that if — and it's always an if — the Fed slashes rates in September, the difference in mortgage rates may be negligible. But for the rest of the fall, they're inclined to believe that rates may trend downward. Obviously, many factors can impact mortgage interest rates. Doing your part to shop around and keep your credit score in good shape can help you focus on the parts you can control.
