Prediction: Mortgage Rates Will Drop Before 2025

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There's a reason so many would-be buyers haven't managed to purchase a home in 2024. Mortgage rates have been stubbornly high for a long time now. And when we combine expensive mortgages with persistently elevated home prices, it's not exactly a formula for affordability.

But mortgage rates have dropped a bit over the past couple of months. And there's a chance they'll continue to fall modestly between now and the end of the year.

Whether that's enough to make homeownership affordable for a lot more people is questionable. But the good news is that there are steps you can take to score the best mortgage rate possible.

Why mortgage rates are likely to drop

The Federal Reserve raised its benchmark interest rate (the federal funds rate) several times in 2022 and 2023 in an effort to cool inflation. Now that it's made progress, the central bank is looking to start cutting that rate. It's signaled that it should be ready to do so before the end of the year.

The Fed doesn't set mortgage rates, but once it lowers its benchmark interest rate, the cost of borrowing could start to decline modestly across the board for consumers.

Personal loans could become more affordable. Auto loan borrowers might get relief. And similarly, mortgage rates might come down a bit.

Does this mean buyers will be looking at sub-6% rates by the end of the year? Maybe not. But as of July 25, the average 30-year mortgage rate was nearly 6.8%. If rates were to fall to, say, 6.3% by the end of the year, that's better than where they are today.

How to lock in the lowest mortgage rate

Regardless of how mortgage rates trend in the coming months, you can take steps to save money on yours. First, do your best to boost your credit score to the upper 700s. Of course, you can aim for a perfect 850 credit score if you want to. But once your credit score reaches the upper 700s, you might qualify for the same rates as someone whose credit is perfect or close to it.

You can boost your credit score by paying all bills on time and paying off existing credit card balances. It's smart to check your credit report for errors every few months, as well.

Another tactic you can employ to snag the best mortgage rate is to lower your debt-to-income ratio. This measures how much money you owe each month relative to your earnings.

Paying off credit card balances and other loans could help get that ratio into more favorable territory, but so could raising your income -- say, by picking up a side hustle temporarily.

Finally, shop around for a mortgage . Contact at least three different lenders and compare their offers. Aim to do your rate shopping within 14 days so your various applications cause as little damage to your credit score as possible.

There's a good chance that mortgage rates will drop before 2025. But don't expect a plunge -- rather, it's more likely we'll see a modest decline from where rates stand today. However, that may be just enough to make homeownership attainable -- especially if you use the tricks above to score the best rate lenders in your area are willing to offer up.

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