When Will Mortgage Rates Go Down? What Homebuyers & Homeowners Need to Know

Mortgage rates have been volatile in 2025, and the question on many minds is: when will mortgage rates go down? Understanding what drives rate movements—and which indicators to watch—can help you make smarter home buying, refinancing, or locking decisions.

At Trust Lending, we follow these trends closely so you don’t have to. In this post, we’ll explore what influences mortgage rates, potential scenarios for decline, and how you can act strategically in the meantime.

What Drives Mortgage Rates?

Before predicting a drop, it helps to know what factors push rates up or down:

1. Treasury yields & bond market: Mortgage rates tend to closely follow the 10-year U.S. Treasury yield. When bond investors demand higher returns (because of inflation, risk, or policymaker uncertainty), mortgage rates generally rise.

2. Federal Reserve policy & rate expectations: Though the Fed doesn’t directly set mortgage rates, its decisions (rate cuts or hikes, forward guidance) influence market expectations and investor behavior.

3. Inflation & economic growth signals: If inflation proves sticky or the economy shows strength, markets may expect the Fed to maintain higher rates longer, which pushes mortgage rates up.

4. Credit spreads & risk premiums: Lenders add margin based on borrower risk (credit score, down payment, property condition). In times of uncertainty, those spreads widen, adding to the rate.

5. Supply & demand in mortgage capital markets: The mortgage market’s capital flows, investor appetite for mortgage-backed securities, and regulatory changes also influence mortgage pricing.

   
   

When Could Rates Begin to Decline?

Predicting rate movements is tricky, but here are scenarios where downward pressure could emerge:

• Aggressive Fed cuts: If inflation cools faster than expected or economic data softens, the Fed might cut rates more aggressively. That could push long-term yields—and thus mortgage rates—lower.

• Flattening yield curve or bond demand: If investors flock to safer long-term bonds, yields could drop, bringing mortgage rates down.

• Weaker economic growth or recession indicators: If markets see weakening consumer spending or job growth, they may anticipate rate cuts and drive mortgage rates down preemptively.

• Global or geopolitical risk: Safe-haven demand during uncertainty can lower bond yields, indirectly putting downward pressure on mortgage rates.

Realistically, many analysts see modest declines in late 2025 or early 2026, depending on inflation, job data, and Fed policy signals.

What It Means for Homebuyers & Refinancers

Even if rates decline, your ability to benefit depends on timing and strategy:

• Lock when favorable: If you're under contract or ready to refinance, waiting might cost you if rates drift upward again.

• Use rate buydowns or float-down options: Some loans or builder offers include temporary rate reductions or float-down clauses.

• Watch for trigger points: If rates drop 0.5% or more from your current rate, that may justify refinancing (depending on closing costs).

• Stay credit- and equity-ready: When rates move down, those with strong credit and solid equity stand to get the best pricing before others flood the market.

  
  

Advice from Trust Lending

At Trust Lending, we help borrowers and brokers navigate uncertain rate environments by:

• Monitoring real-time rate activity and flagging opportunities

• Running scenario comparisons to see when a refinance or purchase makes sense

• Offering flexibility in rate locks, buydowns, and program options

• Educating clients on market factors, so they feel confident rather than reactive

There’s no guaranteed timeline for when mortgage rates will go down, but the combination of inflation trends, Fed policy, and bond market behavior creates windows of opportunity. By staying informed, prepared, and strategic, you can position yourself to act when conditions become favorable.

If you’re considering a refinance or home purchase and want help navigating rate decisions, call us at (888) 884-1160 or email ReverseHelp@trustlending.net. We’re here to help you time it right.