Mortgage rate forecast September 2025

The U.S. economy is going strong and inflation is holding above the Federal Reserve’s target rate of 2 percent. Still, the central bank might lower its benchmark rate this month. But will a Fed rate cut mean lower mortgage rates? Maybe not.

“The Federal Reserve is poised to cut rates, but there is no assurance that mortgage rates will follow the federal funds rate lower,” says Stephen Kates, financial analyst for Bankrate. “Concerns over U.S. deficits may continue to hold long-term borrowing rates higher for longer, to the detriment of the aspiring mortgage applicant.”

The Federal Reserve is poised to cut rates, but there is no assurance that mortgage rates will follow the federal funds rate lower.

— Stephen Kates Financial analyst for Bankrate

For months, mortgage rates have been held aloft by the combination of a still-strong economy, inflation fears and growing concerns about a rising federal deficit.

So much for hopes that mortgage rates were headed back into the 5 percent range. The average 30-year mortgage rate began declining from 7 percent in mid-2024, fell as low as 6.2 percent in September of last year, then quickly reversed course, tracking back above 7 percent by the end of 2024, according to Bankrate’s weekly lender survey. As Sept. 3, rates stood at 6.55 percent.

The Fed doesn’t directly set mortgage prices, but it does influence them. The central bank cut its benchmark rate three times last year. The Fed next meets Sept. 16-17.

“Volatility in the bond market could lead to swings in mortgage rates, but it is more likely that mortgage rates are going to remain about where they are unless and until there is data that offers more certainty about the direction of the economy,” says Lisa Sturtevant, chief economist at Bright MLS.”

Learn more: How the Fed affects mortgage rates

Will mortgage interest rates go down again?

The possibility of sub-6 percent mortgage rates has grown fainter. Fannie Mae predicts rates will edge down to 6.5 percent by the end of the year, while the Mortgage Bankers Association expects 30-year rates will barely decrease, to 6.6 percent by the end of 2025.

“Noise around the legality of President Trump’s tariffs and concerns over the independence of the Federal Reserve Bank have caused a minor bump in the road, but the weaker employment noise is louder and rates will go lower,” says Melissa Cohn of William Raveis Mortgage.

Learn more: Housing market trends to watch in 2025

Current mortgage rate trends

Higher mortgage rates have kept homeowners clinging to lower-cost loans, a trend known as the “lock-in effect.” Meanwhile, the median national home price clocked in at $422,400 in July, a record high for the month, according to the National Association of Realtors.

What to do if you’re getting a mortgage this year

• Improve your credit score. A lower credit score won’t prevent you from getting a loan, but it can make all the difference between getting the lowest possible rate and more costly borrowing terms. The best mortgage rates go to borrowers with the highest credit scores, usually at least 780.
• Save up for a down payment. Putting more money down upfront can help you obtain a lower mortgage rate, and if you have 20 percent, you’ll avoid mortgage insurance, which adds costs to your loan. If you’re a first-time homebuyer and can’t cover a 20 percent down payment, there are loans, grants and programs that can help. The eligibility requirements vary by program, but are often based on factors like your income.
• Understand your debt-to-income ratio. Your debt-to-income (DTI) ratio compares how much money you owe to how much money you make, specifically your total monthly debt payments against your gross monthly income. Not sure how to figure out your DTI ratio? Bankrate has a calculator for that.

FAQ

• How are mortgage rates determined?

  Mortgage rates are not directly set by any one entity. Instead, mortgage rates grow from a complicated mix of economic factors. Lenders typically set their rates based on the return they need to make a profit after accounting for risks and costs. The Federal Reserve gets a lot of attention, but it doesn’t directly set mortgage rates. The closest proxy for mortgage rates is the 10-year Treasury yield. Historically, the typical 30-year mortgage rate was about 2 percentage points higher than the 10-year Treasury yield. That “spread” has been closer to 3 percentage points since the pandemic.

• When should I refinance my mortgage?

  Deciding when to refinance is based on many factors. If rates have fallen since you took out your mortgage, refinancing might make sense. A refi can also be a good idea if you’ve improved your credit score and could lock in a lower rate. A cash-out refinance can accomplish that as well, plus give you the funds to pay for a home renovation or other expenses.