Mortgage rates have been on a downswing for the past month, with the 30-year fixed rate falling to 6.58% last week — its lowest weekly average since October, according to Freddie Mac.  

For prospective homebuyers hoping that recent dip is the beginning of a prolonged turnaround for stubbornly high interest rates, Fannie Mae has a disappointing prediction. The mortgage giant’s Economic and Strategic Research Group now expects the 30-year rate to end 2025 at 6.5%, an upward revision from the company’s previous prediction of 6.4%.

Adding to the downbeat outlook, Fannie Mae also revised its total home sales expectation for 2025 to 4.74 million units, which is down from its previous estimate of 4.85 million.

Regarding mortgage rates, Melissa Cohn, regional vice president of William Raveis Mortgage, believes recent media reports touting a plunge in rates over the past month are overblown.

“They’re definitely lower, but I don’t consider that to be plunging,” Cohn said in commentary provided to Scotsman Guide.

If the Federal Reserve cuts the federal funds rate later this year, that will likely have the indirect effect of lowering mortgage rates, which take their cue from Treasury yields that are impacted by the benchmark rate set by the Fed. The odds of a September Fed rate cut spiked following July’s surprisingly weak jobs report from the Bureau of Labor Statistics, though it’s far from certain, given a recent jump in wholesale inflation.

But Cohn thinks if the labor market continues to deteriorate, more investors will flee to the safety of Treasurys, causing bond prices to rise and yields to fall.

“If we continue to see weaker data, no matter what the Fed does, bond yields will continue to drop and mortgage rates will drop,” Cohn said.

As for a “plunge”? That will come in due time, Cohn predicts.

“At some point over the next two years, rates will actually, finally, for real, come down,” she said.