Sorry to throw cold water on the latest mortgage rate hike, but this might be as good as it gets.
At least if you are to believe the latest forecast from the Mortgage Credit Agency, which is typically an optimistic outfit.
MBA released its latest forecast at its 2025 annual convention and exhibition in Las Vegas, and it wasn’t pretty.
They expect long-term interest rates to remain high despite expected rate cuts from the Fed, which will prevent 30-year fixed mortgage rates from moving much lower.
In fact, they expect a 30-year rate north of 6% from now until the year 2028!
Blame the deficit and stubborn inflation on high mortgage rates
2025: 6.4% 30-year fixed
2026: 6.4% 30-year fixed
2027: 6.3% 30-year fixed
2028: 6.5% 30-year fixed
The MBA explained that “growing budget deficits and elevated inflation expectations will keep longer interest rates from falling further.”
This despite a more accommodating Federal Reserve, which is widely expected to keep lowering its own federal funds rate.
Of course, FFR is a short-term overnight lending rate, while mortgage rates are quite the opposite, typically loans with a longer term of 30 years.
So even if the Fed continues to cut despite continued inflation and out of control government spending, we may not see mortgage rates move significantly lower.
Instead, they can sort of just settle at the current level and stay there for the next few years.
Specifically, the MBA has the 30-year fixed average of 6.4% next year, 6.3% in 2027 and an even higher 6.5% in 2028.
In other words, this could be the near-term floor for mortgage rates for a while, assuming the MBA’s deep rate forecast comes true.
Probably not the news that many newer homeowners and potential home buyers want to hear, but a possible reality nonetheless.
There will be periods when mortgage rates fall and offer opportunities
If this all sounds pretty dire, don’t lose hope.
First, predicting mortgage rates is notoriously difficult, and year after year, the MBA and everyone else who tries to predict rates often fails.
They were wrong for many years when interest rates kept falling, and wrong for many years when interest rates kept rising.
Chances are they’ll be wrong again and we’ll get surprises like we always do.
Additionally, mortgage rates can jump all over the place in any given year, even if they average out to a certain number when you zoom out.
To that end, “the MBA expects that there will be periods when rates fall, which will provide moments of refinancing activity, similar to what has happened several times in 2025.”
So if you’re hoping to apply for that interest rate and refinance to get some payment relief, just make sure you keep a close eye on the rates.
There are always periods when rates drop unexpectedly, even if they are short. Be ready to move if and when that happens to lock in your rate.
To that end, the MBA still expects purchase originations to rise 7.7% to $1.46 trillion next year and refinance originations to rise 9.2% to $737 billion.
Still a good chance we go even lower from here
I’m also not convinced this is the best we’re going to see for mortgage rates. It seems quite clear that the economy is cooling significantly.
We all remember the ugly jobs reports released before the government went into shutdown mode.
When the economy slows, mortgage rates tend to fall.
We are already at some of the lowest levels in the past three years (remember the 8% rates?) and that is without a real flight to safety due to this perceived weakness.
The stock market remains at very high levels and if and when investors decide to finally seek the safety of bonds, we can see that interest rates will be the benefits.
As it stands now, we’re just above 6% for a 30-year fix, already below the MBA’s current forecast.
And there are plenty of reasons to expect even lower mortgage rates, whether it’s falling inflation or rising unemployment, even if government spending remains a problem, as it always seems to be.
Read more: How we will get to sub-6% mortgage rates by the end of 2025.
