As mortgage rates rise ahead of the holiday season, potential buyers are holding off on buying homes in hopes of better terms in the new year.

Freddie Mac officials reported Last week Thursday, the 30-year fixed rate mortgage averaged 6.72%, up from 6.54% the previous week. This is the fifth consecutive week of gains and the highest level since August.

This news makes recent forecasts a source of hope for people waiting for rates to drop. During the 2024 Annual Convention and Exhibition, leaders of the Mortgage Bankers Association presented their outlook for 2025, which included a benchmark forecast for mortgage rates. at the end of 2025 at 5.9% and remains close to that level for the forecast horizon.

While no one has a crystal ball, industry professionals who recently spoke with The Mortgage Note agree that rates will be better for buyers in 2025.

Dr. Lisa Sturtevantchief economist at Bright MLS, expects rates to decline over the course of next year, ending at 5. She said there are several factors that could determine the direction of rates, including actions by Federal Reserve officials.

Investors anticipate that the Federal Open Market Committee will do so cuts rates once again at his next meeting. They cut the target range for the federal funds rate from the previous level of 5.25% to 5.5% up to 4.75% up to 5% in September.

Although the Fed does not dictate mortgage rates, the market often follows suit.

“But other factors could also drive rates down. For example, while an economic recession is still unlikely, if the economy takes a turn, we would expect mortgage rates to drop more significantly,” Sturtevant said.

Donald Olhausen Jr., owner WeBuyHousesInSanDiego.comagrees with Sturtevant that buyers can expect mortgage rates to decline through 2025. It’s a delicate balancing act for Federal Reserve officials, he explained.

“If we see more rate cuts of 0.25% without economic damage, it suggests that the Fed has successfully pulled off a ‘soft landing,'” said Olhausen Jr. “However, if rate cuts are 0.50% , this indicates that the Fed feels we need to take more aggressive action to prevent a recession.”

Glenn Phillips, CEO and Principal Economic Analyst at Lake Homes Realtysaid that while mortgage rates would likely fall next year, the rate cuts would not be dramatic because they would create too much risk of inflationary responses.

“If rates fall too low and too quickly, it could lead to higher home prices and fuel inflation,” Phillips said.

Housing is in a tough spot, he said. While housing inventory is improving, there is still pent-up demand. Regardless of which way rates go, housing costs will continue to rise, keeping affordability a concern for buyers over the coming year.