Anticipated interest rates for home loans in June 2025
Economic uncertainties and slowing growth could possibly lead to a slight decrease in mortgage rates in June, forecasters predict. Despite the Federal Reserve remaining firm on interest rates, there's a chance that deteriorating economic data or a post-election environment could nudge rates down.
Greg McBride, our website's chief financial analyst, noted, "June presents a critical juncture economically and, therefore, for mortgage rates. If signs of economic decay start to emerge, rates will retreat. However, if the economy shows resilience in the face of weaker consumer and business sentiment, and inflation persists, so will rates."
For several months, mortgage rates have remained high due to a robust economy, inflation concerns, and growing apprehension regarding a rising federal deficit. The hopes of seeing mortgage rates drop back into the 5 percent range have dimmed, with experts predicting rates to remain around 6.1 percent by the end of the year, according to Fannie Mae. The Mortgage Bankers Association expects 30-year rates to barely decrease, reaching 6.6 percent by the end of 2025.
Although the Federal Reserve doesn't set mortgage prices directly, it does exert influence. The central bank cut its benchmark rate three times last year but held steady at its January meeting. The Fed will meet again in mid-June.
The complex relationship between the Fed and mortgage rates hinges on the 10-year Treasury yield, which serves as the closest proxy for mortgage rates. Typically, the 30-year mortgage rate is around 2 percentage points higher than the 10-year Treasury yield. However, since the pandemic, this 'spread' has been closer to 3 percentage points.
If you plan to secure a mortgage this year, it's advisable to work on improving your credit score, saving for a down payment, and understanding your debt-to-income ratio to help lower borrowing costs.
[Related: How the Fed affects mortgage rates][Related: Housing market trends to watch in 2025]
In the context of current economic uncertainties and the influence of the Federal Reserve on the mortgage market, seeking ways to improve personal-finance aspects like credit score, saving for a down payment, and understanding debt-to-income ratio becomes crucial, as mortgage rates, though predicted to show a slight decrease, are anticipated to remain elevated, possibly affecting one's ability to secure a mortgage at favorable terms (6.1 percent by the end of 2022, according to Fannie Mae, and 6.6 percent by the end of 2025, as per the Mortgage Bankers Association). Meanwhile, Greg McBride, the chief financial analyst of our website, warns that June presents a critical juncture for mortgage rates, where economic conditions could either lead to a decrease in rates or their continuation, depending on factors such as the resilience of the economy and persisting inflation.
