Mortgage Rate Volatility in 2025: What's Driving the Ups and Downs
Introduction
The 2025 housing market has been anything but calm, and the mortgage landscape is no exception. Rates have been on a roller coaster ride—briefly dipping below 7% only to surge back up again. For homebuyers, understanding what's behind the volatility is essential.
This month’s sharp rate movement is tied to a mix of investor anxiety, tariff policy changes, and the Federal Reserve’s cautious stance on interest rates. Here's what’s happening—and what it could mean for your next home loan.
Stagflation Worries: Investors Hit the Brakes
Redfin economist Chen Zhao pointed to a key shift in investor sentiment that kicked off Monday’s rate increase. In an updated blog post, Zhao explained:
“We may be in for stagflation — a period of simultaneous weak economic growth and high rates/inflation — rather than a recession.”
Though the Federal Reserve held rates steady last month, they hinted at two potential cuts later in the year. But those expectations are fading fast, as investor concerns grow over whether tariffs will drive persistent inflation, potentially forcing the Fed to delay or scrap those rate cuts altogether.
Source: Mortgage News Daily – April 14, 2025
The Return of 7% Rates—and a Bumpy Week
Last Friday marked a milestone: it was the first day since February 19th that the average top-tier 30-year fixed mortgage rate closed above 7%. That week also ranked among the most abrupt periods of rising rates in recent years.
Still, there was a glimmer of relief: the week started off with rates edging back below 7%, roughly in line with the levels seen the previous Wednesday and Thursday. The pullback was in part thanks to Friday evening’s announcement of tariff exclusions for certain tech-related imports, which temporarily calmed the bond market.
But volatility remains a constant threat.
“Rates remain at risk of higher potential volatility as fiscal details continue coming into focus.”
Source: Mortgage News Daily – April 14, 2025
Why Bond Markets Matter for Mortgage Rates
Much of the recent chaos in mortgage rates can be traced back to the bond market. As Mortgage News Daily notes:
“Mortgage rates are based on bonds that share many similarities with U.S. Treasuries, so it's no surprise to see chaos in that market and a concomitant jump in mortgage rates.”
Simply put: when bond yields rise, mortgage rates follow—and with investor uncertainty over fiscal policy and inflation, bond yields have been swinging sharply.
Source: Mortgage News Daily – April 11, 2025
What the Experts Are Predicting
Despite short-term volatility, long-range forecasts remain cautiously optimistic. According to the National Association of Realtors, mortgage rates are expected to average 6.4% in 2025 and 6.1% in 2026.
“So mortgage rates can go down with a Fed rate cut if inflation is under control,” said Lawrence Yun, chief economist at NAR. “But it’s not going to go down to 4% mortgage rate conditions because we have a huge national debt… It cannot go to 4%, and it cannot go to 5%, but it can go to 6% with the Federal Reserve rate cuts and calmer inflation.”
Source: Forbes Mortgage Forecast
Despite short-term volatility, long-range forecasts remain cautiously optimistic. According to Forbes:
Fannie Mae projects the 30-year fixed mortgage rate to average 6.2% by Q4 2025.
These projections assume economic conditions stabilize and inflation cools—two factors that remain uncertain given the ongoing tariff situation.
Source: Forbes Mortgage Forecast
Conclusion
Mortgage rates in 2025 continue to shift with market and policy developments—from concerns about stagflation to bond market reactions to tariffs. While rates have hovered around the 7% mark, volatility is likely to persist.
That’s why it’s more important than ever to stay informed. If you’re planning to buy, I’m here to help you navigate the numbers, follow the trends, and act strategically. Columbus remains a seller’s market, with limited inventory continuing to drive competition and pricing. That dynamic makes having the right guidance essential.
📩 Looking to make a move? Let’s connect—I’d be happy to be your resource and advocate in today’s fast-changing market.