How Updated 30-Year Mortgage Rates in 2025 Will Impact Your Wallet

The Federal Reserve Board will meet again on November 6-7, 2024, and another federal funds rate cut is expected at that meeting. Although mortgage rates are not directly linked to the federal funds rate, they tend to reflect movements in the federal funds rate. As the federal funds rate declines, it is reasonable to expect that mortgage rates will decline in 2025 and could continue to decline throughout the year.

But what does this mean for you? And most importantly: How will updated 30-year mortgage rates in 2025 affect your wallet? There are several ways these changes can have a big impact.

If you have already bought your home

If you’ve already bought your home, it may seem like changing rates won’t do anything for you, but it really depends When you bought your house. If you bought before spring 2022, you probably don’t need or want to take any action since your interest rate is likely in the 5% range or possibly even below that level.

However, if you bought more recently, especially after fall 2022, your rate will almost certainly be in the 6% range or higher. Summer 2023 buyers are in the worst position of all, likely in the 7% or higher mortgage range. If you’re in any of these groups, the lower interest rates that have already begun to emerge and will become more common in 2025 could save you a ton of money.

You’ll have to refinance your mortgage to take advantage of lower rates, but we’ve already done that. a list of refinance lenders you can view here. Refinancing, especially early in your mortgage, can not only save you money each month, but also the amount of interest you pay over the long term.

If you are planning to buy a house in 2025

Planning to enter the market in 2025 as a buyer? First-time buyers in particular will continue to be in a difficult position. While the average home sales price seems to have peaked, there is still a huge shortage of both the types of properties people actually want to buy and listings in general, with Redfin reporting that homes sold in just three months. inventory in September 2024. (It usually takes about four to six months for the housing market to better balance).

So, you’ll really have to hustle to find a home that’s right for you. The good news is that if your home’s value remains more or less stable, you’ll be saving a ton of money every month if you bought it in 2024. How much, you ask?

Well, if you’re looking for a $425,000 home and have a 5% down payment, your interest rate in May 2024, for example, could be around 7.25%. The average rate on a 30-year fixed-rate mortgage has already fallen to 6.5%, but experts expect further cuts in the federal funds rate, which should help lower it even further. Let’s say in 2025 it reaches 5.5%. The difference in principal and interest on your monthly payment compared to a year ago would be about $462. per monthor $5,542 per year.

Data source: Author’s calculations.

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Mortgage rates in 2025 promise more money in your pocket

Rates have been more or less historically average for the past few years, but with the Federal Reserve poised to make at least one more federal funds rate cut in 2024 and even more in 2025, it is highly likely that mortgages will be much higher in 2025 better. rates than we’ve seen in a long time.

This means that if you’re ready to buy, you should definitely do it in 2025, and if you’ve already bought, it’s time to do the math and see if you can get the job done by refinancing your current mortgage to a lower amount. expensive mortgage. Depending on how long you plan to stay in your home, you could see significant savings.

You can prepare for a future mortgage now:

• Reducing debt to improve your debt-to-income ratio
• We continue to save for the down payment
• Considering Down Payment Assistance for First-Time Home Buyers
• Making payments on time to maintain your credit rating
• Don’t apply for new lines of credit to minimize hard inquiries on your credit report.

While none of us can predict the future and can only rely on forecasts for where interest rates might go, a major shake-up of the old Magic Eight Ball suggests that “signs point to yes” when it comes to serious lowering interest rates. 2025 from previous highs.