In March 2025, interest rates for 30-year fixed mortgages dipped slightly by an average of 13 basis points. For potential homebuyers, was this a sign that means rates will drop further or will inflation and unemployment keep rates at a standstill? Mortgage experts say both may happen this year.
Buyers should understand what the mortgage rate dip signals for the housing market. In this blog, we will discuss the direction of home loan rates this year and if this is the right time to buy.
What Factors Led to the Dip in Mortgage Rates?
When the Federal Reserve first began increasing the federal funds rate to cool inflation a few years ago, the rates on lending products increased in response. As inflation began to drop, the Fed cut rates three times in 2024 and mortgage rates began to dip.
But as of March 2025, the Fed has met twice and kept interest rates steady at 4.5%. New tariffs by President Donald Trump’s administration could increase inflation, which would prompt the Fed to raise rates again. Also, new tariffs could increase home prices, making the decision of when to buy even more uncertain.
How Do Lower Mortgage Rates Impact Home Affordability?
Lower rates on mortgages makes buying a home more affordable to more people. This means a larger group of buyers will be looking for homes, increasing the demand in a still-tight housing market. This demand could cause home prices to rise and make bidding on a home more competitive for buyers.
Lower interest rates, however, mean you would save money on your home purchase because more of your monthly payment would go toward your principal amount owed and not to interest. Lower rates save you money so there are extra funds that could be set aside in emergency savings. Take advantage of lower rates by reviewing your credit early in your home-buying journey so you can get the best possible rate.
Is Now the Right Time To Buy a Home Given the Current Mortgage Rates?
Deciding if 2025 is a good year to buy a house is completely up to who wants to become homeowners. The first thing is to assess your financial situation to see if you can qualify for a mortgage. When planning a purchase, evaluating how much home you can afford will help you decide.
Purchasing a home requires you to have money available for the down payment, closing costs and moving expenses. You should have little to no debt and a higher credit score. Having a good credit score qualifies you for the home loan and gives you the best rate off from lenders.
By looking at current market prices, interest rates and your financial situation, you can decide if you are ready for the financial responsibilities of buying and owning property.
What Are the Risks of Waiting for Even Lower Rates?
With economic uncertainty looming in the U.S., waiting for mortgage rates to decline could take a long time. Rates could remain the same for a while, go higher or go lower – we just don’t know. We do know if you find yourself financially prepared to buy a home, locking in a lower interest rate today could be beneficial. If rates drop, you can refinance to a lower interest rate. With the uncertainty surrounding tariffs, inflation and interest rates, having a clear plan for when to buy is extremely helpful.
How Can Homebuyers Lock in Favorable Mortgage Rates?
Having a high credit score is the first place to start if you want to lock in favorable mortgage rates. As previously mentioned, check your credit score months before you want to buy a home and correct any issues in your credit report. Start by reviewing your credit score for free at AnnualCreditReport.com.
Next, be sure to pay down your debt as much as possible to improve your debt-to-income ratio, which lenders review to see how much of your income goes to debt payments. To see what loan rates you’ll be offered, get pre-approved at your preferred lender. Along with the loan rates, you’ll get an idea how much of a home you can buy.
Check with your lender to see if there any ways to lower your rate, such as providing a bigger down payment or participating in a rate reduction program.
How TCU Can Help
Travis Credit Union can help you become a homeowner this year or next. TCU offers a variety of home loan options such as fixed-rate and adjustable-rate loans, and we will work with you to find the right mortgage for your unique financial situation.
Our friendly mortgage loan consultants will walk you through the entire mortgage process, from start to finish. Our loans feature competitive interest rates and flexible terms, and we do refinances, too. Visit our Home Loan Center or contact one of our consultants to get started.
TCU is also focused on your financial wellness. Let us help you plan, save, spend and borrow better. You can start with a financial health assessment at Knowledge Base, our free online financial education platform. At TCU, Knowledge is Power. Get started today.