Will Mortgage Rates Fall Below 6%? Here’s What Could Trigger Low Rates

To give our take, we’re bringing you a bonus episodeThe mortgage rate rollercoaster has taken yet another turn over the last couple of weeks with the average rate on a 30 year fixed dropping from 7.25% down to 6.75% as of this recording. And that’s been great news, but it also has the whole real estate world wondering, will rates now go lower or is this just a temporary reprieve before rates just rise again? Today we’re digging in on the future of rates and I’ll even give you my advice on if now is a good time to lock in or if you’re better off waiting. Hey everyone, it’s Dave head of Real Estate Investing at BiggerPockets, and today we’re coming to you with a quick bonus episode of the podcast. Mortgages have been in the news a lot the last few weeks, well really the last few years, but many, many of you have been reaching out to me over the last couple of days to ask about what this means for the future of rates.
They’ve gone down a little bit, but are they going to keep going down even lower? And over just this past weekend, I was reading a great article from one of my personal favorite analysts, someone I’ve been following for years, Logan Moham who works over at HousingWire. He wrote this article about whether there’s room for rates to fall even further. And since Logan is such a pro, he does his own economic forecasting and he’s basically just right a lot. I figured I’d share the highlights of Logan’s article with all of you, provide some of my own feedback and thoughts, but before we do that and jump into it, I’d need to provide a little bit of context because Logan really gets into some important economic principles and I just want to give everyone a little bit of background about the two main drivers for mortgage rates.
It’s not the Fed. You’ve probably heard me say that a lot. It’s actually two different things. It’s about the yield on a US treasury and the quote spread. Yields are basically the interest that an investor earns when they lend money to the government in the form of bonds. And the spread is the difference between the yield on a bond and mortgage rates. All right, so as I said at the beginning of the show, mortgage rates have dropped from about seven and a quarter to six and three quarters. So why is that happening? Let’s refer to what Logan Mo who wrote this article that I’m going to be reviewing today, says he writes, economic data has been consistently underwhelming of late, and with the 10 year peaking earlier this year, the slide from 4.79 to 4.2% has been a relatively common move whenever economic data gets softer.
So just to unpack what he’s saying, the data that we get every week, every month about the economy, this can be in the form of labor market data. It can be inflation data, it can be consumer spending, it can be news about tariffs or trade deficits, all that stuff that you see maybe in the economic times or the Wall Street Journal or on social media, whatever, it’s that stuff has been a little bit weaker than investors expecting and there’s just this ongoing dynamic. This is almost always how it works, but when economic data is bad, yields go down. And so what Logan is saying is that yields have dropped from about 4.8% to about 4.2%, and that’s what has driven mortgage rates down over the course of 2025 so far. Knowing that the question is will yield fall even further, Logan does something I personally don’t do where he actually maintains these complex economic models and he makes really specific predictions about what’s going to go on with bond rates with mortgage rates.
And his prediction for the 10 year yield is that it’ll fluctuate in 2025 between 3.8% and 4.7%. Just looking at that, he believes that there is further room for mortgage rates to go down, right, because we’re saying that yields are at 4.2%, his range goes down to 3.8%, meaning that mortgage rates could go down another 0.4% or 40 basis points. But I think a really important component of this prediction that they could go down more comes with something else Logan says. He says It will be challenging to reach my target of 3.8% on the 10 year yield without more economic softness or a stock market selloff that would push funds into the safety of bonds. He has this broad range of 3.8% to 4.7%, but he’s saying that it only goes to the bottom end of the range where mortgage rates go down if the economy gets worse from here and if the economy gets better, it could go back up.
And this is a super important point. I’ll just say it again, that yields really fluctuate largely on investor confidence in the broader economy. Yields rise when there’s confidence and it falls when there is fear. So Logan is saying that yields won’t fall further unless there is worse economic news. And for what it’s worth, I totally agree with this, rates will really only fall with worse economic news. But the trouble for us as investors is that economic news is just really mixed these days. One week you get really good inflation reading, it’s encouraging, everyone gets excited, then there’s just a really bad one and everyone sells off. Then there’s a great labor report. The next week there’s a bad one. One week we hear tariffs are on. Then the next week tariffs are off. And that’s not saying that we know whether the economy or the market is good or bad.
It’s just very confused right now. And with confusion comes volatility. And so while I have really no reason to doubt Logan’s ranges, he’s smarter than me, but I do think we don’t yet have a signal that yields are going to keep going down further. He’s saying they can go down to 3.8% if the economy gets worse, but for that we would need a clear indicator that the overall economy is struggling more and more. And although that is possible, it is not yet clear that’s what’s happening. So what does this mean for investors? Is it possible that yields are going to go down and take mortgage rates down with them? Yeah, it’s possible, but your portfolio might be going down at the same time or there might be a higher unemployment rate, which will have all these secondary implications for real estate investors. Remember, this is really important.
It’s possible that they go back up. If we get more positive economic news or if we see higher inflation rates in the next couple of months, rates could absolutely go back up. And so I truly believe that Logan’s range here is right, but that’s a pretty big range, right? It is the difference between a mortgage rate that’s near six and a mortgage rate that’s near seven, and we really just don’t know where that’s going to fall. There is just still too much uncertainty. So I get that people are excited that rates could go down, but they could also go back up. So just keep that in mind as investors. I will get at the end of the episode what I think this means you should do about all that, but just keep that in mind as we move on and briefly talk about the second criteria in mortgage rates, which is the spread. But first we have to take a quick break. We’ll be right back.
Welcome back to this bonus episode of the BiggerPockets podcast where we’re talking about the question on pretty much every investor’s mind. Are rates going to keep falling? It’s been great that they fell half a percentage point here in 2025 so far, but are they going to keep going down should people wait for lower rates before the break? We were talking about yields and how they are probably going to be very volatile for the foreseeable future because the economy is just too confusing. The second thing that we need to talk about is the spread. So as I explained at the beginning, bond yields mortgage rates, they move in lockstep, but there is a difference between them. Bond yields right now are at four and a quarter. Mortgage rates are at six and three quarters, so there is a two and a half percentage point spread. Is that going to change?
Is it going to get bigger? What’s happening here? So the important thing to know about the mortgage spread is that typically historically they’re about 1.9% or 190 basis points, but when the Fed started raising rates in 2022, there was a lot of uncertainty about the direction of rates and the economy. And so the spread got bigger. It actually ballooned from about 1.9% all the way up to 3%. Then last year we actually got some relief, and that’s a big reason. Mortgage rates moved from about 8% down to about 7.5% to about 6.75%. Where we are now, yes, yields had to come down, but we also saw the spread contract a bit as well, which has been really beneficial to mortgage rates. And if you’re wondering if the spread really matters, let me just refer back to the article we’re talking about today where Logan says Today’s housing market would look entirely different if mortgage spreads hadn’t improved in 2024 and in 2025 so far, typically we see spreads hover between 1.6 and 1.8%.
If we were still grappling with the challenging mortgage spreads that define 2023, we’d be facing mortgage rates a staggering 0.7% higher right now. So just keep that in mind. That has been one of the big wins that we’ve had as a real estate community over the last year. But he goes on to say, conversely, if spreads align more with historical norms, remember they used to be a lot lower. If today’s spreads were back to normal levels, we would enjoy mortgage rates below 6%. What a game changer that would be. So think about what Logan’s saying here. He’s saying we’ve come back down a little bit, but there is room for the spread to fall further and improve mortgage rates. He actually goes on to say, again, looking ahead to the rest of this year, I expect only a modest improvement in mortgage spreads around 0.27 to 0.41%.
And that might not sound like a lot, but that means that rates could fall another 0.3, maybe 0.4% without mortgage yields going anywhere. And so I hope Logan is right here. He is often right, and that would be great. I am personally not going to bank on this because honestly no one really saw the mortgage spreads increasing like they did in 2022 and 2023 and just given volatility in yields, I wouldn’t really count on volatility in spreads going down at all because we’re just seeing volatility across the board in the economy. So that’s basically what one of the smartest people I know thinks is going to happen to the mortgage market. He thinks that yields are going to be volatile. He thinks that spreads are going to come down and hopefully that means we’re going to have a slight downward trajectory for mortgage rates over the course of the rest of 2025.
So getting back to our core question that we’re talking about here today, can rates go lower? Yes, for sure they can. But remember that comes if economic news sours more and yields fall. If all that happens, we could see rates as low as 5.75% for a 30 year fixed rate mortgage according to Logan. And that would be one entire percentage point lower than where we are today, which would provide a lot of relief in the real estate market and really improve housing affordability. But remember that Logan’s range is big. It goes from 5.75 all the way up to 7.25, and we’re not getting to that lower end of the range unless we see a big stock market sell off, which is definitely possible in my opinion. People smarter than me about the stock market all say that the stock market is valued really high and that there’s a big potential for a correction.
Actually, I was reading a different article in the Wall Street Journal this weekend that said that the three managers of the biggest funds in the United States all think that there’s going to be a stock market correction. So just that’s one anecdotal point, but a lot of people think that might happen. And so if all that happens, that could bring the mortgage rate down to the lower end of the range. But since I personally don’t try and time the stock market, I think it’s most likely, at least in the foreseeable future, let’s say the next three to six months rates are more likely to hover in the mid to upper sixes. And I just want to reemphasize that there’s this trade-off here. People are always hoping for rates to come down or for prices to crash in the housing market. In my opinion, there’s never really perfect or ideal investing conditions.
It’s always a trade off. So we could see mortgage rates come down if there’s a stock market sell off or there’s weaker economic news. But that comes with secondary effects like I was talking about and mentioning earlier. That means that your stock portfolio, if you have one, might be worth less. It means that there might be higher unemployment rates, which means that there will be less household formation and demand for apartments, and that could lower rent growth. It could mean that prices go down and asset values and property values for existing portfolios go down. So there’s no perfect scenario. I think it’s very unlikely and wishful thinking to think, okay, we’re going to have the economy do well, mortgage rates to come down and housing prices to remain certain, that doesn’t mean you shouldn’t invest. It just means that this perfect scenario is very unlikely.
And so what I recommend people do, and this is basically always my advice, whether we’re in a good economy, a bad economy, basically don’t try to predict the future underwrite deals based on current market conditions. And if the deal works now, buy it. Do not spend your time dwelling on what could be in three or six months from now because honestly no one knows. And if you wait, there is a good chance rates go back up. I don’t think that is the most probable scenario right now, but it is absolutely possible. There’s a very realistic case that inflation goes up or the economy starts doing even better and then rates go back up and then you’re just sitting around waiting even longer to start pursuing financial freedom and buying the real estate deals that you should have bought right now or three months ago. Because remember, the beauty of real estate and fixed rate debt is that if your deal works now with current rates, it’ll almost certainly work in three months or six months or 36 months from now, regardless of what happens with rates if they go down or they go up.
If it works today, it’s going to work in the near future. So concentrate on the here and now and not on that unknowable future. Alright, everyone, that is it for this bonus episode. Hope you all learn something that will help you on your path to financial freedom. I would love your feedback. We don’t do a lot of these bonus episodes or news reactions, but if they’re helpful to you, please let me know. You can always find me on BiggerPockets or you can hit me up on Instagram where I’m at the data deli. Thanks so much for listening and we’ll have a regularly scheduled episode tomorrow. As always.