Buyers should keep an eye on the possibility of rate cuts in the next few months. Tharon Green/CNET
The housing market is hardly immune to political and economic volatility, yet mortgage rates have been eerily calm over the last period. Since the spring, the average rate for a 30-year fixed mortgage has moved in a mostly narrow range around 6.8% and 7%.
Mortgage rates were expected to gradually improve in 2025. However, the Trump administration's inflationary tariffs, deficit spending and geopolitical maneuvering led to bleaker forecasts, including fewer interest rate cuts by the Federal Reserve.
The Mortgage Bankers Association now predicts that mortgage rates will decline only slightly to 6.7% by the end of the year.
"You'd need to see mortgage rates pretty far below current levels, certainly below 6.75%, to incentivize homebuyers," said Beth Ann Bovino, chief economist at U.S. Bank.
Economists were also monitoring how a war in the Middle East could spark fresh volatility across global markets, significantly affecting oil prices and the US dollar, which would have a ripple effect on long-term Treasury yields and mortgage rates.
However, with the Israel-US-Iran ceasefire holding steady for now, rates haven't undergone major fluctuations. Logan Mohtashami, lead analyst of Housing Wire, said that traders mostly saw the bombing of Iran's nuclear facilities as a short-term event, muting the impact on mortgage rates.
In the coming weeks, housing market experts will be assessing the potential for another military escalation, oil prices and how the Fed responds to labor market data and recession risks. If any of these variables lead to a downward trend in home loan rates, more buyers may come off the sidelines.
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Fed interest rate cut still projected for fall
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