Today's steep interest rates have made monthly mortgage payments too expensive for many American homebuyers, forcing them to delay their purchases. While mortgage rates declined in September 2024, providing some temporary relief to homebuyers, a mix of factors drove them back up again shortly thereafter — once again pricing out some buyers who had been waiting on the sidelines for a more friendly rate environment.

Still, with the Federal Reserve suggesting possible rate cuts next year, buyers want clear guidance for their decisions. That has led many would-be homebuyers to wonder whether mortgage rates will drop to 5% sometime soon. The answer to that question isn't so cut and dry, though. While some financial experts predict that type of rate decline could happen soon, others see a longer path ahead.

And while lower rates would help buyers save money, leading industry professionals say other factors, such as home prices and available inventory, also affect affordability. Here's what these experts have to say about when mortgage rates might reach 5% and what that means for your homebuying strategy.

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When could mortgage rates hit 5% again? Experts weigh in

Getting back to 5% home loan rates will take time, experts say.

"I agree with the most recent MBA forecast, expecting rates to reach 5% in the second half of 2025," says David Druey, Florida regional president of Centennial Bank. However, this is mere speculation — and several factors could change this timeline.

loanDepot's sales manager, Debbie Calixto, highlights the Federal Reserve's upcoming decisions may affect it.

"Their next moves will depend on economic data released between now and then," Calixto says. "If the labor market continues to weaken and inflation [stays] subdued, the Fed may proceed with [more] measured rate cuts, even if economic strength continues."

Adding to this complexity is the issue of low housing inventory, which keeps pushing property values higher. This, in turn, puts more pressure on interest rates.

While United American Mortgage Corporation's loan officer, Dean Rathbun, observes a stabilizing market after the election, he emphasizes that predicting future rate changes remains challenging.

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These factors could push mortgage rates down faster than expected

Several key economic factors could speed up the drop in mortgage rates, according to Rathbun and Robert Driscoll, director of residential lending at Rockland Trust, including:

• The10-year Treasury yield: When bonds fall, mortgage rates often follow.
• Federal Reserve rate cuts: While these directly affect certain types of borrowing, they can also influence the broader mortgage market.
• Unemployment trends: Rising unemployment often leads to lower rates. This is because investors worry about future spending and move money to safer investments.
• The Consumer Price Index (CPI): Lower inflation numbers typically help bring down mortgage rates.
• Global events: International conflicts can affect trade and oil prices. This impacts inflation — and changes in inflation influence rate decisions.
• Market employment data: Strong job reports tend to keep rates higher. On the other hand, weaker numbers can push rates down as the Fed tries to support the economy.

Should you wait for lower rates to buy a home?

While you may be planning to wait for rates to drop before making a home purchase, many experts advise against waiting for the perfect rate to buy a home.

"If you're in a position to purchase a home and can manage the monthly payment, I recommend going for it," stresses Calixto. She points to buyers who waited during the price increases in 2020 and now find themselves priced out of the market.

This view finds strong support across the industry. Driscoll, for example, agrees that personal goals and financial readiness should drive buying decisions — not market timing. In today's competitive housing market, not locking in a rate now could mean missing out on the ideal home for your family.

Rising home prices might also offset any savings from a lower rate, and refinancing is always an option down the line for homeowners who buy now. Meanwhile, those sitting on the sidelines risk losing their dream home and the chance to start building home equity.

The bottom line

Predicting exactly when mortgage rates will hit 5% is difficult. It could happen by late 2025, but market conditions could speed up or delay this timeline. "Some consumers feel rates will drop in the next two to four months [but] that may never happen," says Rathbun. He warns that rates typically fall much slower than they rise.

Rather than waiting for the perfect rate, it could make sense to meet with several lenders to understand your current options and budget. They can help you determine whether buying now makes sense for your situation, and explain how refinancing might work if and when rates drop.

Remember that while mortgage rates matter, finding the right home within your budget matters more. Waiting too long could mean missing out on both.