Mortgage Rates & Fed Outlook: What May 2025 Means for Homebuyers and Homeowners

As the Federal Reserve kicks off its two-day policy meeting this week (May 6–7, 2025), financial markets, real estate professionals, and homeowners alike are watching closely. The decisions made by the Fed could have a significant impact on interest rates, inflation control, and the overall direction of the U.S. housing market.

At Peregrine Financial, we specialize in helping our clients navigate changing financial conditions with confidence. Here’s your comprehensive update on mortgage trends, housing market activity, and what to expect in the months ahead.

Are Mortgage Rates Going Up or Down in 2025?

As of May 6, 2025, the average 30-year fixed mortgage rate sits at 6.83%, while the 15-year fixed rate averages 6.01%. For homeowners looking to refinance, the average 30-year refinance rate is currently 6.91%.

Although these rates remain elevated compared to historic lows seen in 2020–2021, they have held relatively steady over the past few weeks. Most experts forecast that mortgage rates will remain within the 6%–7% range through the rest of 2025, barring any dramatic shifts in monetary policy from the Federal Reserve.

Housing Market Trends: Signs of Activity, But Affordability Concerns Persist

The U.S. housing market is showing mixed signals:

• Pending home sales rose sharply in March, up 6.1% month-over-month, the largest gain in over a year. This signals increased buyer interest as consumers adjust to the new interest rate environment.

• However, mortgage application volume has declined, and affordability remains a major hurdle. The average monthly mortgage payment in the U.S. has climbed to $2,870, marking a new high.

For many prospective homebuyers, elevated home prices combined with high mortgage rates are making homeownership feel out of reach—even as demand shows signs of rebounding.

What Is the Federal Reserve Expected to Do Next?

The May 2025 Federal Reserve meeting is expected to result in the Fed holding interest rates steady, as policymakers continue balancing inflation control with the goal of maintaining economic growth.

Additionally, new tariff policies on imported construction materials could drive up renovation and homebuilding costs. This may put upward pressure on home prices and limit supply in certain markets.

Key Takeaways for Homeowners and Buyers

• Mortgage rates in May 2025 remain high, though fluctuations have been minimal in recent weeks.

• Buyer demand is recovering, as seen in the surge of pending home sales, but affordability remains a serious concern.

• Economic policy, Fed decisions, and global trade developments will continue to shape the housing market and interest rate trends.

  
  

Should You Buy, Sell, or Refinance in 2025?

If you're wondering how today’s market conditions affect your financial goals—whether you're purchasing a home, considering a refinance, or exploring investment opportunities—our team at Peregrine Financial is here to guide you.

We combine deep market insight with personalized strategy to help you make informed, confident decisions in any market.

Contact us today to schedule a consultation.