Mortgage rates are expected to drift downward in February after hitting a ceiling in January. Despite briefly peaking above 7%, rates have remained just below 7%, with little movement expected as the month progresses. Inflation plays a major role in determining mortgage rates, with the Federal Reserve’s efforts to control inflation likely resulting in lower rates.
However, rates are not guaranteed to fall, and could increase if economic data shows unexpected growth or if the Trump administration imposes policies like tariffs. Two key economic data releases in February will provide insight into potential rate changes. The Mortgage Bankers Association and Fannie Mae predict that rates will remain steady or drop slightly in the first quarter of 2025.
Higher mortgage rates have led to longer home buying timelines and an increase in inventory, but this has not translated to lower prices. Strong demand for homes has kept prices high, with the median price of an existing home reaching $404,400 in December 2024, a 6% increase from the previous year.
While initial predictions for January expected rates to finish lower, they remained above 6.9% for most of the month. It is advised for borrowers to consider their personal circumstances and not delay obtaining a mortgage in anticipation of falling rates, particularly with the unpredictable nature of current economic trends.
Overall, the housing market continues to face challenges due to high mortgage rates, but strong demand is expected to keep prices elevated in the near future.
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