Mortgage rates have been a hot topic lately, and with good reason. Despite the persistent inflation and the Federal Reserve's decisions on interest rates, homebuyers are still waiting for a break. With May 2025 on the horizon and market conditions shifting, many are wondering what will happen to mortgage rates in the coming month.

Let’s break it down, based on what experts predict:

Mortgage Rates Could Drop in May 2025

Could mortgage rates go lower in May? Experts say there is a chance. If the economy shows signs of cooling off, it could lead to a drop in rates. According to Steven Glick, a licensed mortgage loan officer, inflation needs to fall closer to the Fed’s 2% target.

Pixabay / Pexels / If we see a decrease in the Consumer Price Index to around 2.5% or lower in April’s report, it could set the stage for a Fed rate cut. As Treasury yields drop in response, mortgage rates often follow.

Consumer behavior is already hinting at a potential slowdown. Dean Rathbun from United American Mortgage Corporation observes reduced spending on goods and services. This drop in consumer confidence could signal a stall in economic growth, potentially pushing mortgage rates lower in May.

Mortgage Rates May Stay the Same!

What if rates don’t budge much in May? Glick suggests that if inflation stays stable, around 2.8% to 3%, and job growth continues at a moderate pace, mortgage rates may hold steady. In this scenario, the Fed is unlikely to make any major moves in May, meaning no significant changes to the benchmark rate.

With Treasury yields staying around 4.3%, we could see mortgage rates remaining in the mid-6% range for the foreseeable future.

While many buyers may be hoping for a significant rate drop, this steady scenario could offer some stability for those looking to secure a mortgage. It’s not the dramatic change many are hoping for, but it can still provide a sense of predictability in the market.

Will Mortgages Go Up?

ASP / Pexels / International factors play a key role. Karen Mayfield from Multiply Mortgage points out that China’s role as a major holder of U.S. Treasuries and mortgage-backed securities is critical.

Of course, there is always the chance that mortgage rates could climb instead. Glick warns that if the economy heats up and inflation exceeds 3%, mortgage rates could rise. A stronger-than-expected jobs report or economic data showing unexpected growth could lead to higher Treasury yields, which typically pushes mortgage rates up.

Another factor that could cause rates to rise is market uncertainty. Rathbun explains that mortgage markets dislike unpredictability. With so many variables in play, uncertainty could push rates higher to compensate for the increased risk of bonds. So, if markets start to see more risk, lenders may raise rates to protect themselves.

If China decides to sell these assets in retaliation for global tensions, it could lead to a spike in mortgage rates.

The truth is that mortgage rates are closely tied to multiple factors, and no one can predict the future with certainty. While some experts predict lower rates, others believe they will stay stable or even rise. The Federal Reserve’s policies and inflation levels play a significant role, but external factors like international tensions or unexpected economic shifts could throw everything off course.