As we move into the spring of 2025, the Boston housing market is facing some economic uncertainties that are shaking consumer confidence. But don’t expect mortgage rates to budge too much in April and May. iStock illustration

This forecast aims to provide insights into factors influencing mortgage rates, helping stakeholders make informed decisions. Key factors discussed include economic uncertainties, inflation trends, labor market conditions and Federal Reserve policies.

As we move into the spring of 2025, the Boston housing market is facing some economic uncertainties that are shaking consumer confidence. The March 2025 Conference Board Consumer Confidence Index has dropped to its lowest level since January 2021, and the University of Michigan’s Consumer Sentiment Index has also seen a decline. It’s worth noting that two-thirds of consumers are expecting an increase in unemployment over the next year.

Mortgage rates are still high compared to historical standards. Although inflation has eased from its peak, it remains persistent, limiting the potential for significant rate declines. Core inflation, measured by the Fed’s preferred metric – Core Personal Consumption Expenditures (PCE) – has been around 2.8 percent for several months, indicating a stall in the disinflationary progress that had earlier fueled hopes of rate cuts

The labor market is holding strong, with unemployment rates hovering near 4 percent since May 2024. GDP growth for 2024 was 2.8 percent, though it cooled slightly in the fourth quarter and is forecasted to moderate to 1.7 percent in 2025.

However, new uncertainties have emerged. Tariff expansions by the Trump administration are expected to increase inflation in the near term, while evolving immigration policies could impact labor supply, wage inflation and overall economic growth – all key factors in the mortgage rate equation.

Over the past two months, the rate on a conforming 30-year fixed-rate mortgage has fluctuated between 6.63 percent and 6.95 percent, according to Freddie Mac, representing a 32-basis-point spread. This period of unusual stability saw rates trend incrementally lower, providing a predictable environment for both borrowers and lenders.

The 7-year/6-month adjustment hybrid adjustable-rate mortgages, or ARMs, have floated between 6.25 percent and 6.95 percent, per Mortgage News Daily, over the last two months excluding a one-day spike to 7.25 percent during the week of Feb. 10.

 Looking Ahead

Several forces are converging to shape the outlook for mortgage rates this spring. The Federal Reserve’s evolving policy stance is a major factor. After reducing the federal funds rate by a full percentage point in late 2024, the Fed has adopted a wait-and-see approach.

Fed Chair Jerome Powell made several comments at his press conference after March’s interest rate-setting Federal Open Market Committee meeting that reinforce that the Fed will continue to observe a wait-and-see approach, including that “inertia comes when you see weaker growth but higher inflation, and they kind of offset each other.”

Additionally, he said, “there is a certain amount of inertia when it comes to changing things in this highly uncertain environment.”

Bond market behavior has echoed this sentiment. Despite the Fed’s easing of short-term policy, long-term yields have risen due to a growing term premium – investors demanding greater compensation for inflation risk and policy uncertainty. As a result, mortgage rates have not followed the Fed’s downward path.

Fiscal and trade policy also add new wrinkles. Tariffs on key imports and a strong labor market may push inflationary pressures higher in the coming months. Meanwhile, immigration restrictions could tighten the labor supply, raise wages and inject further price pressure – factors that could forestall any meaningful drop in mortgage rates.

Economic growth remains positive, with fourth-quarter 2024 GDP coming in at 2.4 percent growth. However, there are concerns about whether the Atlanta Fed’s GDPNow model forecast for the first quarter 2025 of a 2.8 percent decline in GDP will be met, despite conflicting data. The Fed will likely have little opportunity to measure the impact of tariffs and fiscal spending cuts, leaving them uncertain about cutting rates when they meet in May.

Preetam Purohit

Where Does That Leave Mortgage Rates?

Given that these variables have been largely in place over the last two months, we expect conforming 30-year fixed-rate mortgage rates reported by Freddie Mac to remain within a range of 6.5 percent to 6.95 percent over the next two months. This forecast assumes a continuation of current inflation and economic trends, with modest sensitivity to upcoming data releases.

For 7/6 hybrid ARMs, we anticipate a band of 6.10 percent to 6.85 percent, although pricing may remain volatile due to limited demand and lender-specific factors. However, greater price stability and slightly increased inventory may present opportunities.

The next Federal Reserve meeting scheduled for early May could be pivotal. While no policy change is expected, Chair Powell may offer new insight into the Fed’s thinking on inflation, growth and rate cuts. Markets will be watching closely for any signs of a shift in tone or strategy.

As we step into spring – and with the Red Sox soon taking the field – Boston’s housing market enters a season of both renewal and reflection. For buyers, the current rate environment is still challenging, but greater price stability and slightly more inventory may offer opportunities. For sellers, strong demand in key price brackets remains a tailwind.

By the time we head into summer, we’ll have the data to review the accuracy of this forecast. Until then, keep an eye on the data, take advantage of any opportunities in the housing market, enjoy the longer days and catch a game or two.

Preetam Purohit is the head of hedging and analytics at Embrace Home Loans.