As we look ahead to March, mortgage rates might hold steady for most of the month. However, there’s a possibility they could tick up after the Federal Reserve wraps up its meeting on March 19. Many are hoping for a rate cut from the Fed in the first half of the year, but they might be left wanting.
For those eyeing the real estate market, the outlook on mortgage rates might seem a bit grim in March. Yet, there’s a silver lining for optimistic buyers: the housing market is brimming with more options. While home prices continue to climb, they’re not shooting up as rapidly as in the past. Here’s a little secret—around one-third of homes on the market have seen a price reduction.
So, it’s not all doom and gloom.
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### What’s Happening with Mortgage Rates?
Before we dive into any optimism, let’s address the less-than-positive state of mortgage rates. Afterwards, we’ll get into the silver linings.
Throughout 2025, the 30-year mortgage rate has been stubbornly above 6.75%. This situation is largely driven by inflation remaining uncomfortably high. For lenders to see a profit, they need to set mortgage rates above inflation. Consequently, when inflation climbs, mortgage rates follow suit.
Inflation reached a peak midway through 2022, with the consumer price index soaring to 9%. The Federal Reserve reacted by aggressively increasing the overnight federal funds rate, effectively reining in inflation. By last autumn, with inflation showing signs of waning, the Fed modestly eased the federal funds rate over several months, but has held steady since December.
### What’s Next for the Fed?
Few anticipate the Federal Reserve will lower the overnight rate at the upcoming March 18-19 meeting. Yet, there’s still a hope for rate cuts later in the year. According to CME FedWatch, expectations are set for a potential reduction during the June 17-18 meeting.
But there’s no guarantee. If the Fed decides to delay cutting rates, it’s likely because inflation remains above their 2% target. In January, the CPI clocked in at 3%.
In his congressional testimony on February 11, Fed Chair Jerome Powell made it clear: “we do not need to be in a hurry to adjust our policy stance.” Reinforcing this stance, he told a senator “we think our policy rate is in a good place and we don’t see any reason to be in a hurry to reduce it further.”
Christopher J. Waller, a Fed governor, echoed this sentiment on February 17, stating, “a pause in rate cuts is appropriate” given the current data doesn’t support a reduction.
The clear message from Powell and fellow Fed officials is that rate cuts will take time. If Powell stays the course after the March 19 meeting, expectations for a rate cut might shift further out, potentially nudging mortgage rates higher.
### A Ray of Hope for Buyers
Not everything about the mortgage landscape is bleak for those looking to buy. For those willing to see beyond the headlines, there are promising signs.
The first bit of good news is the increase in available homes. The National Association of Realtors reported 1.18 million existing homes on the market at January’s end, marking a 14% increase from a year earlier. Meanwhile, home builders have 495,000 new homes listed, the highest in 17 years, providing more options for buyers.
Additionally, home prices have shown signs of moderation. Nationally, they increased by 4.7% in December 2024—down from a 6.9% increase in December 2023—according to the Federal Housing Finance Agency. The reason? High mortgage rates are prompting buyers to be more thoughtful about prices.
Lastly, many sellers are adjusting their expectations, reducing asking prices as properties linger longer on the market. By late February, 33.2% of single-family homes had seen price cuts, the highest percentage in over a decade, according to analytics firm Altos Research.
Mike Simonsen, the founder, mentions in a YouTube commentary that this indicates a weak pricing environment for home sales for the foreseeable future.
While this doesn’t equate to an immediate decrease in overall prices, a persistent rise in mortgage rates above 7% through spring could lead to a year-over-year decline in home prices, suggests Simonsen.
### Looking Ahead According to Forecasters
Insights from both the Mortgage Bankers Association and Fannie Mae suggest that the 30-year mortgage rate is likely to hover around 6.9% in the initial months of 2025. Considering the average rate in the first two months, major changes in March seem unlikely.
### February Predictions vs. Reality
Just before February, I noted that “mortgage rates might drift downward” after having hit a ceiling. And indeed, rates averaged 6.84% throughout February, a slight decrease from January’s 6.96%, based on Freddie Mac’s weekly survey.
