2025 Mortgage Rates: What to Expect and How to Prepare

GECU Voices brings you guidance and insight from experts within the Credit Union. Today’s blog post was penned by Neil Peterson, GECU's Chief Credit Officer.

Many prospective homebuyers and current homeowners alike are keeping a close eye on mortgage rates during the new year. Understanding where mortgage rates are headed can play a pivotal role in financial planning, whether you're looking to buy your first home or refinance an existing mortgage.  

Will mortgage rates go down in 2025? 

The question on everyone’s mind: will mortgage rates go down in 2025? To answer this, we need to consider several factors, including economic conditions, Federal Reserve policies, inflation trends, and global financial markets. 

In recent years, mortgage rates have experienced significant fluctuations. The Federal Reserve’s efforts to combat inflation through interest rate hikes played a major role in driving up borrowing costs. However, as inflation continues to show signs of easing and the economy stabilizes, some experts predict that mortgage rates could see a modest decline in 2025. 

According to forecasts, rates for 30-year fixed mortgages will hover around the mid-6% range until 2026.¹ While this is higher than pre-pandemic levels, it represents a stabilization compared to the spikes seen in 2022 and 2023. Keep in mind that rates can vary depending on borrower profiles, including credit scores, loan types, and down payments. 

Preparing for 2025: Tips for buyers and homeowners 

Whether you’re planning to buy a home or refinance in 2025, preparation is key. Here are some actionable steps so you’re prepared to act.  

1. Determine how much house you can afford  

Determining how much mortgage you can afford is a crucial step in the homebuying process. The answer depends on factors like your income, monthly expenses, credit score, and the current mortgage rates. 

A helpful tool for this calculation is a mortgage calculator, which allows you to input details such as: 

• Your desired home price 
• Down payment amount  
• Loan term (e.g., 15 or 30 years) 
• Interest rate 

2. Improve your credit score 

A higher credit score can secure better interest rates. Start by paying down existing debts to lower your credit utilization ratio, which is a key factor in your credit score. Always make timely payments on all your bills, as payment history has the biggest impact on your score. Avoid opening new lines of credit unless absolutely necessary, as each inquiry can temporarily lower your score. 

3. Save for a larger down payment 

A larger down payment reduces your loan-to-value ratio, which can help you qualify for better interest rates. It also lowers your monthly mortgage payments and can eliminate the need for private mortgage insurance (PMI) if you put down 20% or more. However, some homebuyers may find it difficult to save 20% due to high home prices. Start building your savings early and consider setting up a dedicated account for your down payment fund to stay on track. 

4. Shop around 

Mortgage rates and terms vary significantly by lender, so it pays to shop around. Request written loan estimates from multiple lenders and compare their interest rates, closing costs, and loan terms to find the best deal. Even a small difference can save you thousands of dollars over the life of the loan. Credit Unions are not-for-profit organizations, making them a fantastic place to look for affordable mortgage loans.  

5. Consider loan types 

Not all mortgages are created equal, and the right type depends on your financial situation and goals. Adjustable-rate mortgages (ARMs) may offer lower initial rates, but they come with the risk of rate increases later. Alternatively, 15-year fixed-rate loans typically have lower interest rates than 30-year loans but come with higher monthly payments. Explore your options and choose the one that aligns with your long-term plans. 

Understanding the trajectory of mortgage rates is critical for making sound financial decisions. While no one can predict the future with absolute certainty, staying informed about forecasts and using tools like mortgage calculators can help you plan effectively. 

Whether you’re asking, "Will mortgage rates go down in 2025?" or wondering how much you can afford, knowledge is your most valuable asset. Keep a close watch on economic trends, consult experts, and be proactive in your financial planning to make the most of the opportunities the housing market presents this year and beyond. And when you’re ready to shop around, consider taking your business to General Electric Credit Union. Simply confirm your membership eligibility online, then schedule an in-branch or virtual appointment to talk through your options with a dedicated team member.