Mortgage Rate Forecast for February 2025: Expert Insights

As the Federal Reserve held interest rates steady at 4.25-4.5% during its January 28-29 meeting, homebuyers are left wondering how this will affect mortgage rates in February 2025. We reached out to four financial experts for their insights on where mortgage rates may be heading.

A Drop Below 7%: Greg McBride’s Forecast

Greg McBride, Chief Financial Analyst at Bankrate, believes mortgage rates will pull back below the 7% mark in February. However, he emphasizes that this decline will rely heavily on inflation improving. McBride points out that inflation is a major driving force behind mortgage rates, so a reduction in inflation would be required to keep rates below 7% and possibly see them fall even further.

Holden Lewis Sees Moderate Decline Ahead

Holden Lewis, a home and mortgage expert at NerdWallet, also expects a decrease in mortgage rates this month. After the rates surpassed 7% in January, Lewis anticipates a decline, largely due to the ongoing reduction in core inflation. While inflation’s direction will remain a key factor, he suggests that this decline will not be drastic. He mentions that bond yields and mortgage rates will have more space to decrease, but the drop will be modest. For homebuyers, this offers some hope, but the rate reductions will be gradual rather than substantial.

Jessica Lautz Predicts Rates Around 6.5%

Jessica Lautz, Deputy Chief Economist at the National Association of Realtors, forecasts that mortgage rates will hover around 6.5% in February. Lautz explains that the 10-year Treasury yield, which often correlates with mortgage rates, has fallen to 4.5% after peaking near 5% in early January. This decrease in the Treasury rate is expected to have a direct impact on mortgage rates, causing them to decline accordingly. Lautz’s prediction signals a positive outlook for buyers, but again, the change won’t be drastic.

Chip Lupo Anticipates Stability

Chip Lupo, an analyst at WalletHub, suggests that mortgage rates will largely remain steady in February. He cautions homebuyers to be prepared for the possibility that rates will stay near their current range of 6.5% to 7% for a 30-year fixed mortgage. This stability could create challenges for affordability, especially for first-time buyers. Lupo believes that if rates don’t change much, home sales may slow down, and inventory could rise as some buyers are priced out of the market.

What Does This Mean for the Housing Market?

With mortgage rates staying relatively high, the housing market is expected to experience continued challenges in February. McBride points out that significant movement in mortgage rates will be necessary to shift the housing market dynamics. Until then, home sales are likely to stay subdued.

Lewis also notes that affordability will remain a critical concern for many buyers. As mortgage rates stabilize or decrease only slightly, potential buyers may take longer to purchase homes. As homes linger on the market, an increase in inventory could help cool the rapid rise in home prices. However, Lewis still anticipates that home prices will continue to rise during the spring, though at a slower pace compared to previous years.

On the other hand, Lautz highlights that a significant portion of the housing market—about one-third—consists of cash buyers who are not affected by fluctuations in mortgage rates. This group of buyers will continue to shape the market regardless of mortgage rate movements, as they are not concerned with financing.

Should You Refinance or Buy in February?

For those considering refinancing, McBride points out that there aren't many opportunities to do so at favorable rates. With mortgage rates relatively high, refinancing may not offer much benefit unless you have a specific need, such as a closing deadline or accessing home equity.

For prospective homebuyers, Lautz recommends moving forward if you're financially prepared. While mortgage rates may experience minor fluctuations, they are expected to remain relatively stable. It’s important to keep in mind that mortgage rates are just one factor in the broader picture of housing affordability. Home prices are still expected to rise, which could affect the overall monthly mortgage payment for buyers.

Conclusion: A Period of Stability, But No Drastic Changes

Looking ahead, February 2025 will likely see mortgage rates stay in a range between 6.5% and 7%. Although there may be some slight declines due to improving inflation, experts agree that significant changes are unlikely. While affordability challenges will persist, especially for first-time homebuyers, home prices are expected to rise, albeit at a slower rate than in recent years. If you are financially ready to purchase, it may be a good time to move forward, but keep in mind that the housing market's pace will depend on both mortgage rates and home prices.