Did Mortgage Rates Finally Go Down in 2025? Here's What Actually Happened

As 2025 has now come to a close, we can assess whether the widely anticipated decline in mortgage rates actually materialized. Major housing analysts, including the National Association of Realtors, Zillow, Realtor.com, and Redfin, had predicted that 2025 would bring relief to homebuyers struggling with affordability. But the reality proved more complex than many expected. The consensus pointed to moderate improvement rather than dramatic shifts, and that cautious outlook largely held true throughout the year.

Expert Predictions for 2025 Mortgage Rates

Going into 2025, the predictions were remarkably aligned across the industry, even if the magnitude of expected decline varied. The National Association of Realtors and Realtor.com had projected rates to average between 6.2% and 6.4% by year’s end. Zillow anticipated a tighter range of 6.5% to 7%, while Redfin forecasted an average of 6.8%. These predictions reflected cautious optimism—experts believed mortgage rates would move lower, but no one anticipated a sudden, dramatic plunge.

The conservatism in these forecasts proved justified. Just as predicted, rate movement in 2025 followed a volatile, uneven path rather than a smooth downward trajectory. This pattern echoed 2024’s experience, when Freddie Mac’s benchmark 30-year fixed rate had climbed to 7.22% in May before dropping to 6.08% in September and then rising again. This see-saw behavior continued into 2025, reminding borrowers that mortgage rate stability remains elusive.

The Persistent Affordability Challenge

For prospective homebuyers throughout 2025, the gradual rate improvement offered limited comfort. The high cost of financing has dampened housing market momentum over recent years, with an Opendoor survey showing that more than half of respondents cited mortgage rates as the primary barrier to homeownership. The contrast with pandemic-era conditions illustrates the impact: in May 2021, with rates near historic lows, the average monthly payment on a $400,000 home (with 20% down) was approximately $1,067. At a 6.69% rate—closer to 2025 levels—that same loan payment ballooned to $2,063 per month. Lower rates do expand purchasing power, but the 2025 decline was insufficient to restore pandemic-era affordability for many buyers.

What Shaped Mortgage Rates in 2025?

Understanding rate movement throughout 2025 requires looking beyond the Federal Reserve’s interest rate decisions. While many borrowers focus on the Fed’s actions as the primary driver, the reality is more nuanced. The central bank’s short-term rate decisions have no direct impact on long-term mortgage rates. Instead, 30-year mortgage rates track much more closely with the 10-year Treasury note, according to housing finance experts.

Treasury yields respond directly to economic conditions. When the U.S. economy is strong—with low inflation and high employment—investors typically favor stock market returns over Treasuries, forcing the government to offer higher yields to attract buyers. Since mortgages are typically held for 10 years, their rates move in lockstep with 10-year Treasury yields. This relationship proved consistent throughout 2025, as Treasury movements dictated the broader mortgage rate environment.

Global Events and Market Volatility

Beyond domestic economic conditions, 2025 demonstrated how geopolitical factors can introduce unpredictability into mortgage rate trajectories. Ongoing conflicts, including the Russia-Ukraine situation and Middle East tensions, created uncertainty affecting consumer sentiment and the relationship between Treasuries and mortgage rates. Major global disruptions could impact commodity supplies—grain, oil, and others—potentially driving inflation higher and pushing interest rates upward across the board.

The 2025 experience underscored an important reality: while housing finance professionals can make educated projections based on economic fundamentals, unexpected geopolitical events or policy shifts can rapidly alter the landscape. The year’s relative stability masked underlying uncertainties that could shift dramatically.