Sorry to throw cold water on the recent mortgage rate rally, but this could be as good as it gets.
At least, if you believe the latest forecast from the Mortgage Bankers Association, which is typically an optimistic outfit.
The MBA released its latest forecast at its 2025 Annual Convention and Expo in Las Vegas and it wasn’t pretty.
They expect long-term rates to remain elevated, despite expected Fed rate cuts, which will keep 30-year fixed mortgage rates from moving much lower.
In fact, they project a 30-year fixed north of 6% from now through the year 2028!
Blame the Deficit and Stubborn Inflation for 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 term rates from falling further.”
This despite a more accommodative Federal Reserve that is widely expected to keep cutting its own federal funds rate.
Of course, the FFR is a short-term, overnight lending rate, while mortgage rates are much the opposite, typically loans with a lengthy 30-year term.
So even if the Fed keeps cutting, despite continued inflation and out of control government spending, we might not see mortgage rates move meaningfully lower.
Instead, they might kind of just settle in at current levels and stay there for the next few years.
Specifically, the MBA has the 30-year fixed averaging 6.4% next year, 6.3% in 2027, and an even higher 6.5% in 2028.
In other words, this might be the near-term floor for mortgage rates for a while, assuming the MBA’s dour rate forecast comes true.
Probably not the news a lot of recent homeowners and prospective home buyers want to hear, but a possible reality nonetheless.
There Will Be Periods Where Mortgage Rates Dip and Provide Opportunities
If that all sounds pretty awful, don’t lose hope.
First off, it’s notoriously difficult to predict mortgage rates, and year after year, the MBA and all the others that attempt to forecast rates often fail.
They were wrong for many years when rates kept falling, and wrong for many years when rates kept rising.
Chances are they’ll be wrong again and we’ll get surprises as we always do.
In addition, mortgage rates can bounce all over the place in a given year, even if they average a certain number once you zoom out.
To that end, the MBA “expects there will be periods where rates drop, which will provide moments of refinance activity, similar to what has occurred several times in 2025.”
So if you’re hoping to apply for that rate and term refinance to get some payment relief, just be sure to keep a close eye on rates.
There are always periods when rates drop unexpectedly, even if they’re brief. Be ready to move if and when that happens to lock in your rate.
To that end, the MBA still expects purchase originations to increase 7.7% to $1.46 trillion next year and refinance originations to rise 9.2% to $737 billion.
Still a Good Chance We’ll Go Even Lower From Here
I’m also not convinced this is the best we’re going to see for mortgage rates. It seems pretty clear the economy is cooling significantly.
We all remember those ugly jobs reports released before the government went in shutdown mode.
When the economy slows, mortgage rates tend to drop.
We’re already at some of the lowest levels in the past three years (remember the 8% rates?), and that’s without a real flight to safety due to this perceived weakness.
The stock market remains at very lofty levels and if and when investors decide to finally seek the safety of bonds, we could see interest rates be the beneficiary.
As it stands now, we’re just above 6% for a 30-year fixed, already below the MBA’s current forecast.
And there are plenty of reasons to expect even mortgage lower rates, whether it’s falling inflation or rising unemployment, even if government spending continues to be an issue, as it always seems to be.
Read on: How we get to sub-6% mortgage rates by the end of 2025.
