Mortgage interest rates could continue to decline this fall, if certain conditions are met, experts say.
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Average mortgage interest rates have started their much-awaited descent, recently falling to a new three-year low. They've declined over the past few weeks, which is a positive sign for homebuyers. For the past two to three years, mortgage rates have been elevated. Though it may not be significant, the reprieve could signal what's to come this fall.
The Federal Reserve made its first rate cut of the year in September, reducing the federal funds rate by 25 basis points. Further rate cuts could be on the horizon, as the agency aims to keep the economy in balance with maximum employment and price stability. Given the current economic data and policy changes, is now a good time to lock in a rate or wait? We spoke with three home lending experts about the potential for more mortgage interest rate drops this fall and what borrowers should consider.
Start by seeing how low your current mortgage rate offers are here.
Will mortgage interest rates drop further this fall?
Average mortgage rates on a 30-year fixed-rate mortgage stood at 6.26% as of the week of September 18th, according to data from FreddieMac. Over the past few weeks, mortgage interest rates have been trending downward. But will mortgage rates continue to go down? It depends on various factors. Here's what the experts we spoke to said to monitor:
The Federal Reserve's future actions
The Federal Reserve cut the federal funds rate for the first time in September, after holding it steady all year. However, that rate cut was largely expected, which may have influenced the direction of mortgage rates right now.
"That essentially has already been priced in and may have something to do with why we've seen rates come down a bit so far," says Mark Anderson, senior loan officer at Guild Mortgage.
The Fed has two more meetings in 2025 in October and December. Current data from the CME Group's FedWatch tool shows there is a high likelihood of rate cuts at both meetings. Only time will tell, but even so, the Federal Reserve's action doesn't have a direct influence on mortgage rates.
"Mortgage rates don't just follow the Fed like a shadow; they're tied more to long-term bond markets. If markets get spooked about inflation sticking around, rates might not budge much. From my experience, a Fed cut creates ripples, not waves, but it's still a moment to watch," says Steven Glick, director of mortgage sales at HomeAbroad, a real estate investment fintech company specializing in mortgages for foreign buyers.
Learn more about your current mortgage rate options online today.
The economic landscape
Whether mortgage interest rates rise or drop has a lot to do with the economic landscape and investors' expectations, which affect the 10-year Treasury yield.
"Today's conversation about the Fed, the mortgage rates and the housing market really comes down to two things. How the job market is shifting, and how inflation expectations are playing out. And those two forces make this year very different from last year when the Fed started cutting," says Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors.
Inflation is inching upward, while job growth has slowed down. The unemployment rate is increasing slightly, which could signal a cooling labor market.
The mortgage interest rate forecast for the fall
Now that mortgage rates have started to go down slightly, many homeowners want to know if that momentum will continue. According to the experts we spoke to, the mortgage interest rate forecast for the fall could bring lower rates, but probably not anything major.
"What I think is most likely at this point is that the trend toward lower rates will probably continue. I don't see anything changing very quickly," says Anderson.
"Based on what I'm seeing in the market right now, I expect mortgage rates to fall a bit more through the end of 2025, likely settling around 6.0-6.2%," says Glick. "The economy's cooling with those recent weak jobs report, plus inflation ticking up just a hair, which could push the Fed to keep cutting rates at their next meetings in October and December."
The bottom line
While a mortgage interest rate drop may not be significant, it can be meaningful. If mortgage rates hit the 6% mark on a 30-year fixed-rate mortgage, around 5.5 million additional households could afford a home, according to data from the National Association of Realtors. So if interest rates start to fall to that level, the housing market may see an increase in activity.
If you're serious about homebuying and want to be ready if mortgage interest rates drop, Glick says, "My advice this fall is to get pre-approved now."
Because mortgage rates can fluctuate, you might consider a rate lock, which essentially freezes your mortgage rate until you close. There are two issues to keep in mind, though. First, if you need to extend the rate lock, you may be charged to do. Secondly, if mortgage rates fall even further, you could be ineligible for a new rate. You can ask your mortgage lender about a float-down option, which could allow you to score a lower interest rate if rates fall. However, this typically comes at a cost, often a percentage of the loan amount. If you're looking to enter the real estate market, the key is to do your research and be ready if rates continue to decline.
Have more questions? Learn more about mortgage interest rates and homebuying here now.
