Mortgage Forecast: What the January 20 presidential inauguration could mean for rates

On a normal day, it’s almost impossible to predict which direction mortgage rates will go. Now, with so much uncertainty in financial markets, Mortgage rates It could see more ups and downs, especially after the president’s inauguration on January 20.

Earlier this month, the average interest rate was on a 30-year fixed mortgage jumped over 7% It hasn’t come down yet.

Multiple factors have led to interest rates rising recently. Strong economic data declined Expectations of interest rate cuts by the Federal Reservepushing 10-year Treasury yields (a key benchmark for home loan rates) higher. The mortgage market has also been shaken by concerns about the incoming Donald Trump administration It will fuel inflation Increasing the government debt deficit.

Over the next few weeks, much will depend on what the president-elect says and does when he takes office, he said Jacob channelchief economist at LendingTree. If Trump declares an economic emergency to impose tariffs or starts a war with Denmark, for example, mortgage rates will rise to even higher levels.

“Unless the president-elect’s tone becomes more moderate and disciplined once he takes office, expect volatility to remain prevalent,” Channel said.

After Trump’s inauguration, the Fed will hold its first policy meeting of the year. Although economists believe the Fed will not do so Raising or lowering interest rates On January 29, investors will be looking for any signals to inform their risk assessment and trading strategy, all of which could influence the direction of mortgage rates.

Mortgage rate volatility in 2025

Based on the current situation, A Significant decline in mortgage rates Before the spring home-buying season, this is unlikely to be possible Valerie Saunderschief executive strategist at the National Association of Mortgage Brokers.

It would take a sudden economic shock, such as the onset of a recession or a rise in oil prices, to see interest rates fall sharply. “Rascal changes in trend are usually the result of some significant event emerging somewhere that upsets the financial markets,” he said. Keith GambingerVice President of Mortgage Website HSH.com.

However, geopolitical outlook, labor market and inflation data have the potential to change mortgage expectations.

Currently, away from daily fluctuations, Mortgage rates It is expected to rise by about 7% over the next few months. If inflation continues to slow and the Fed can implement two 0.25% cuts this year, experts say mortgage interest rates could rise. inches down to 6.25% recently.

Federal Reserve Governor Christopher Waller said Thursday that he is optimistic about declining inflation, which will allow the central bank to reduce inflation. Continue on the path of lowering interest rates In the first half of 2025. The central bank made three interest rate cuts in 2024, and investors are now betting on another rate cut in June or July.

While the Fed influences the direction of overall borrowing rates, it… It does not directly control the mortgage market. In fact, market forces often move in anticipation of Fed policy moves, relying on economic data and forecasts to price their expectations in the bond market.

“Since the rise in bond yields is due to anticipation of future events, if the narrative changes, bond yields may change,” he said. Kara ngchief economist at Zillow.

A look at the 2025 housing market

today Unsustainable housing market Consequences of higher mortgage rates, a Long-standing housing shortagesRising house prices and loss of purchasing power due to inflation.

🏠 Low housing stock: A balanced housing market typically has five to six months of supply. Most markets today average about half that amount. according to Freddie MacWe still have a shortage of about 3.7 million homes.

🏠 High mortgage Rates: In early 2022, mortgage rates reached historic lows of around 3%. As inflation rose and the Fed raised interest rates to tame it, mortgage rates more than doubled. In 2025, mortgage rates are still high, pushing millions of potential buyers out of the housing market.

🏠 Rate lock effect: Since the majority of homeowners are Locked in mortgage rates Below 5%, they are reluctant to give up low mortgage rates and have little incentive to list their homes for sale, leaving a scarcity of resale inventory.

🏠 House prices rise: Although demand for home purchases has been limited in recent years, home prices remain high due to a lack of inventory. The average price of homes in the United States was $429,963 in November, up 5.4% year over year, according to Redfin.

🏠 Severe inflation: Inflation means an increase in the cost of basic goods and services, which leads to a decrease in purchasing power. It also affects mortgage rates: when inflation is high, lenders usually raise interest rates on consumer loans to ensure a profit.

What home buyers should know

It’s never a good idea to rush into this Buying a house Without knowing what you can afford, so set a clear budget for your home purchase. Here’s what experts recommend before buying a home:

💰 Build your credit score. Your credit score will help determine whether you qualify for a mortgage and at what interest rate. A Credit score A score of 740 or higher will help you qualify for a lower rate.

💰 Save for a larger down payment. greater Initial payment It allows you to get a smaller mortgage and get a lower interest rate from your lender. If you can afford it, a down payment of at least 20% will also void your private mortgage insurance.

💰 Shop for mortgage lenders. Comparing loan offers from multiple mortgage lenders can help you Negotiate a better price. Experts recommend getting at least two or three loan estimates from different lenders.

💰 Consider renting. choose for Rent or buy a house It’s not just comparing your monthly rent to your mortgage payment. Renting offers flexibility and lower upfront costs, but buying allows you to build wealth and have more control over your housing costs.

💰 Consider mortgage points. You can get a lower mortgage rate by buying Mortgage pointsThe cost of each point is 1% of the total loan amount. One mortgage point equals a 0.25% decrease in your mortgage rate.

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