I’ve posted multiple times in the past few months that the assumptions of rates just dropping down into the 5% range is not a slam dunk because of the threat of inflation. That is still true. I also said I personally felt rates would drop, but that it’s not guaranteed. It’s all about inflation.
The reason is massive government spending deficits. Now we have two new data points suggesting a recession: CMBS and credit card soaring default rates. A recession would very likely drop mortgage rates, but it might be a short temporary timeframe or not go all the way down into the fives. Why?
The damn scary future facing us now is potential stagflation. The recession hits, deficits get even worse, the government cuts interest rates, Trump policies are inflationary, and that causes inflation to get worse.
In this situation mortgage rates could do anything. If we have a nice normal shallow recession, with minimal rates cuts, sane Trump policies, or the government somehow manages a soft landing, and inflation rates stay low, then mortgage rates could settle into the fives.
My WAG for 2025 lowest 30 year mortgage rates are:
<5% 10% chance
5-6% 65% chance
6%+ 25% chance
Just my opinion .