If you’ve been following the housing market in East Tennessee, you’ve probably noticed that mortgage rates have been anything but steady. For many homebuyers and sellers, these fluctuations can cause confusion and uncertainty. So what’s driving the current volatility in mortgage rates—and what does it mean for those navigating the Knoxville housing market?
Ryan Coleman, Broker/Owner of Hometown Realty, breaks down the key factors contributing to today’s shifting mortgage rates and how they’re influencing local real estate activity.
The Federal Reserve’s Role in Rate Changes
At the heart of mortgage rate volatility lies the Federal Reserve. While the Fed doesn’t set mortgage rates directly, its decisions on the federal funds rate heavily influence them. When the Fed raises rates to combat inflation, borrowing becomes more expensive—including for home loans.
“As the Fed adjusts its rate policies, we often see mortgage rates follow,” says Ryan Coleman. “That can either open or close the door for buyers depending on how high or low those rates move.”
For buyers in East Tennessee, these changes can significantly affect monthly payments and overall affordability, making timing more important than ever.
Inflation Pressures Keep Markets on Edge
Inflation remains one of the biggest economic stories of the past few years—and its impact on mortgage rates is undeniable. When inflation is high, lenders raise rates to protect their returns. The Federal Reserve may respond by tightening monetary policy, further pushing rates upward.
“In Knoxville and the surrounding areas, we’ve felt the effects of rising costs—from groceries to gas to new construction materials,” says Ryan. “And those costs trickle down into the housing market too, especially through mortgage rates.”
For East Tennessee buyers, this makes pre-approval and locking in a rate even more critical.
Local Market Conditions Add Another Layer
National trends are only part of the equation. Local supply and demand also influence how mortgage rates affect the housing market. In Knoxville and nearby communities, tight inventory has continued to keep competition strong.
“When inventory is low, home prices often rise—and that, combined with rate volatility, can squeeze buyers,” Ryan explains. “But on the flip side, it creates opportunities for sellers who price their homes correctly.”
If the local housing supply increases, we may see more balance, which could help offset some of the pressure caused by fluctuating rates.
What to Expect for the Rest of 2025
Looking ahead, many experts predict continued fluctuations in mortgage rates, especially as inflation trends remain uncertain and the Federal Reserve weighs further action. However, some analysts are hopeful that rates may begin to stabilize by the end of the year.
Ryan Coleman shares that same cautious optimism. “There’s potential for more consistency later in 2025, but we’re advising clients to stay ready and act strategically. Buyers may want to move quickly when rates dip, while sellers should monitor the market closely for timing.”
How Buyers and Sellers Can Navigate Volatility
For buyers, staying informed and pre-approved can make a huge difference when rates shift. Working with a knowledgeable local lender and real estate agent ensures you’re ready to act when the timing is right.
For sellers, knowing how rates influence buyer behavior helps you position your home to sell faster—and potentially for more money.
“Don’t let rate headlines scare you off,” says Ryan. “There are still great opportunities in this market, especially when you have the right guidance.”
Bottom Line
Mortgage rate volatility continues to shape the real estate landscape in 2025, especially in growing markets like Knoxville and East Tennessee. Understanding the factors behind these fluctuations—such as Federal Reserve actions, inflation, and economic trends—is essential for making informed decisions whether you're buying or selling.
Ryan Coleman, Broker/Owner of Hometown Realty, brings over 20 years of local market expertise to help you navigate shifting interest rates with confidence. If you're looking for trusted guidance in an unpredictable market, Ryan is here to help you make the smart move.
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