Mortgage Rates Predictions This Week – May 1-7, 2025: Will Rates Drop?

Wondering what's going to happen with mortgage rates this week? The consensus leans towards a slight decrease. According to a recent Bankrate poll, a majority of experts (54%) believe rates will fall in the coming week (May 1-7, 2025). The remaining experts are split, with 23% predicting an increase and 23% anticipating no change. Let's dive deeper into the factors influencing these predictions and what it could mean for you.

The mortgage market is a complex beast, influenced by everything from inflation and employment figures to international trade deals and the Federal Reserve's decisions. So, figuring out where rates are headed can feel like trying to predict the weather, but understanding the key drivers can give you an edge.

Mortgage Rates Predictions for Week – May 1-7, 2025: Will Rates Drop?

What's Driving the Predictions for This Week?

Several factors are at play, shaping the outlook for mortgage rates. Here’s a breakdown of the key influences:

• Economic Data: Recent reports paint a picture of a potentially slowing economy.
  • The economy shrank in the first quarter.
  • Tepid economic data and a softening of tariff rhetoric are helping rates.
  • The ADP report showed weakness in job creation for April.
• Federal Reserve (The Fed) Actions: The market is keenly awaiting the Fed's next meeting, with speculation of potential rate cuts. A potential rate cut is stronger than average.
• Trade Deals and Tariffs: The ongoing trade situation and the potential impact of tariffs continue to create uncertainty. Trump's tariff policy is threatened to be undermined by Amazon considering listing tariff impacts on its prices.
• Treasury Yields: The yield on 10-year Treasurys has fallen for six consecutive trading days. Long-term mortgage rates are highly correlated to 10-year Treasury yields.

Expert Opinions: A Mixed Bag of Forecasts

To get a comprehensive view, let's look at what some experts are saying about the direction of mortgage rates this week:

Those Who Think Rates Will Go Down (54%):

• Michael Becker (Branch Manager, Sierra Pacific Mortgage): Believes rates have improved due to tepid economic data and softening tariff rhetoric. He anticipates a weak Non-Farm Payroll report will further push rates lower.
• Jeff Lazerson (President, MortgageGrader): Expects a significant drop, citing the economy's contraction in the first quarter.
• Ken Johnson (Walker Family Chair of Real Estate, University of Mississippi): Points to the declining 10-year Treasury yields as an indicator of lower mortgage rates.
• Joel Naroff (President and Chief Economist, Naroff Economic Advisors): Thinks the potential easing of tariffs could contribute to a rate decrease.
• Dr. Anthony O. Kellum (President & CEO, Kellum Mortgage): Cites recent trends showing a steady drop, influenced by signs of an economic slowdown and potential Fed rate cuts. He also mentions Fannie Mae's adjusted outlook projecting a modest decline by the end of 2025.
• Sean P. Salter, Ph.D. (Associate Professor of Finance, Middle Tennessee State University): Expects markets to anticipate Fed rate cuts following the news of GDP contraction.
• Les Parker (Managing Director, Transformational Mortgage Solutions): Pending trade deals continue to emit positive signals, which calm the mortgage market.

Those Who Think Rates Will Go Up (23%):

• Heather Devoto (Vice President, Branch Manager, First Home Mortgage): Anticipates a slight rise due to traders' fears of potential stagflation.
• Denise McManus (Global Real Estate Advisor, Engel & Voelkers & Senior Lender, Xpert Home Lending): Believes the market remains choppy, leading to a slight climb in rates as the market awaits the Fed Meeting.

Those Who Think Rates Will Stay the Same (23%):

• Dick Lepre (Senior Loan Officer, Realfinity): Expects rates to remain flat, citing the impact of Trump's tariff policy.
• James Sahnger (Mortgage Planner, C2 Financial Corporation): Notes uncertainty about the impact of tariffs and believes more weakness in economic numbers is needed for further rate improvement.
• Robert J. Smith (Chief Economist, GetWYZ Mortgage): Predicts relatively unchanged rates absent a surprise in the upcoming employment data.

My Take: Cautious Optimism

Based on the current trends and expert opinions, I'm leaning towards the view that mortgage rates are likely to decrease slightly this week. The key factors supporting this are:

• Weakening Economic Data: The recent GDP contraction and lackluster job creation reports suggest the economy may be slowing, which could prompt the Fed to consider easing monetary policy.
• Declining Treasury Yields: The downward trend in 10-year Treasury yields is a positive sign for mortgage rates, as they are closely correlated.
• Potential for Fed Rate Cuts: While not guaranteed, the market seems to be pricing in the possibility of future rate cuts by the Fed, which could put downward pressure on mortgage rates.

However, it's crucial to acknowledge the inherent uncertainty in predicting market movements. Factors like surprise economic news, unexpected geopolitical events, or shifts in investor sentiment could easily disrupt the current trajectory.

What Does This Mean for You?

If you're a prospective homebuyer, this week could present a good opportunity to lock in a slightly lower rate. Even a small decrease can translate to significant savings over the life of a mortgage.

If you already have a mortgage, it might be worth keeping an eye on rates and considering a refinance if they drop significantly. Use a mortgage calculator to see how much you might save by refinancing your mortgage.

Here's a quick guide to help you navigate the current market:

• For Buyers:
  • Shop around for the best rates from multiple lenders.
  • Get pre-approved for a mortgage to strengthen your offer.
  • Be prepared to act quickly if you find a property you like.
• For Existing Homeowners:
  • Monitor mortgage rates closely.
  • Consider refinancing if rates drop significantly.
  • Factor in closing costs and other fees when evaluating a refinance.

Beyond This Week: The Bigger Picture

Looking beyond this week, the long-term outlook for mortgage rates remains uncertain. Several factors could influence their trajectory in the coming months:

• Inflation: Persistently high inflation could force the Fed to maintain or even increase interest rates, putting upward pressure on mortgage rates.
• Economic Growth: Strong economic growth could lead to higher interest rates as the Fed seeks to prevent the economy from overheating.
• Geopolitical Events: Unexpected geopolitical events could disrupt financial markets and impact interest rates.

As the saying goes, past performance is not indicative of future results. The future is tough to see. I feel staying informed, consulting with financial professionals, and being prepared to adapt to changing market conditions is important.