How Long Should I Wait For Mortgage Rates To Drop?

Photography by Getty Images; Illustration by Bankrate

Weren’t mortgage rates supposed to be lower by now? The Federal Reserve slashed the federal funds rate three times at the end of 2024, which raised expectations that the cost of borrowing would drop, too. Instead, 30-year mortgage rates did what no one wanted them to do: They went up. Today, they’re still hovering close to the 7 percent mark, which is significantly higher than most prospective buyers are willing to pay: In fact, nearly a third of non-homeowners (31 percent) said they would need a mortgage rate of less than 5 percent to feel comfortable buying a home, according to Bankrate’s Mortgage Rates Sentiment Survey.

Are you one of those buyers who’s in a hopeful holding pattern, waiting for a more favorable market to roll around? If so, read on to learn about when rates may fall, how much and what to consider if you’re ready to start your house-hunting journey.

When will mortgage rates drop?

There is no completely accurate crystal ball for mortgage rate predictions. But according to Jeff Ostrowski, writer and housing market analyst at Bankrate, things in today’s world look even murkier. “There isn’t a clear link between the Fed’s moves and the direction of mortgage rates,” Ostrowski says. “So it’s hard for anyone to know how mortgage rates will react to the Fed’s decisions.”

One thing is clear, though: If you’ve been pining for the record-low rates of early 2021, you can stop. Those days aren’t returning anytime soon. “Interest rates are holding steady, and while many buyers are still hoping for a significant drop, it’s important to move past the idea that we’ll ever see COVID-era rates again,” says Danielle Andrews, an agent at Realty ONE Group Next Generation in Tallahassee, Florida.

That said, there sill may be some slight relief in the future. Fannie Mae forecasts 30-year mortgage rates will close this year at 6.6 percent, and will end 2026 at 6.5 percent.

Is it wise to try to time the market?

Even a small rate drop can make a difference in how much house you can afford. So if you’ve been holding off on a home purchase, should you hang tight and keep a laser focus on watching rate movements? Not a great idea, Ostrowki says.

“Trying to time mortgage rates is really difficult,” he says. “There’s no guarantee that rates are going to be any more favorable in three months or six months.”

This also relates to what those tracking housing inventory call the “lock-in effect”: Many current homeowners would like to sell, but are locked into mortgages at rates much lower than what’s available today, so they don’t. According to the Mortgage Rates Sentiment Survey, many would need to see a significant — and unlikely — drop to be persuaded to sell:

If I’m ready to buy a home now, should I?

If you feel ready to buy now, there probably isn’t much value in waiting. After all, the longer you wait to purchase a place, the longer you wait to start building equity.

“If you’re ready to buy, if you need housing, if you’re financially prepared, don’t worry too much about where mortgage rates are now versus where they might be in the future,” Ostrowski says.

Sherry Rahnama, broker/owner of RE/MAX Executives in Fairfax, Virginia, recommends doing what is best for your lifestyle. “There are circumstances in life that force you to move,” she says. “Maybe you’re having a child, you’re relocating or want to be a certain school district. There are just so many circumstances where you can’t wait for interest rates to drop.”

Another potential perk of being a buyer right now is that, since plenty of other buyers are still waiting on the sidelines, you can get ahead of the competition.

“Even though the current market isn’t great in terms of mortgage rates, inventories are loosening up a bit,” Ostrowski says.“There’s less competition. If you buy now, you’re less likely to run into bidding wars or multiple offers.”

If I’m not ready yet, how should I prepare?

If the numbers simply don’t add up for you right now, that’s OK. Instead of stretching yourself too thin, follow these steps to put yourself in a good position to buy in the future:

• Focus on boosting your credit score: Your credit score is a primary piece of information that determines your interest rate. While you wait until you’re ready for homeownership, take steps to improve your score. Lenders tend to offer lower rates to borrowers with higher scores, so the higher the better.
• Explore down payment assistance programs: A big upfront payment is often the biggest hurdle for homebuyers. However, you may be able to qualify for a down payment assistance program in your area. Many of these programs are designed for first-timers and low- to moderate-income buyers, but there are some options for existing homeowners, too. Start your search with your state’s housing authority website.
• Research your local market: Take time to educate yourself on the area or neighborhood you want to call home. How much are homes selling for right now? Can you get a deal on an older property that needs a bit of work? The better you understand the local market, the better off you’ll be when you’re ready to make a move.
• Look for savings opportunities: There are easy ways to save money, but a few bucks here and there can feel frustratingly tiny if you’re trying to squirrel away a down payment of tens of thousands of dollars. With that in mind, scrutinize your biggest expenses. If your lease is about to renew, could you consider a lower-priced rental in a different part of town to create some monthly savings? What about your car insurance premiums? And consider putting your down payment savings in a high-yield savings account to earn extra interest.

Bottom line

While some housing market experts believe that mortgage rates may tick down toward the end of the year, it’s no sure bet. Whether you’re a first-time homebuyer or a seller who wants to move but has been scared off by higher rates, get used to the current 6.5 to 7 percent range. “Shop around for the best mortgage that you can get and do the deal,” Ostrowski says. “If mortgage rates really do plunge, you can always refinance later.”