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Mortgage rates are expected to be lowered next year, but the cuts likely won't be enough to provide relief to many prospective buyers in the United States' ongoing home affordability crisis.
Realtor.com's 2025 Housing Forecast The report, released Wednesday, projects that the average interest rate on a benchmark 30-year fixed-rate mortgage will be about 6.3% in 2025, declining slightly to about 6.2% by year-end.
Mortgage rates are expected to decline slightly in 2025, according to Realtor.com's forecasts. (Steve Forst/Newsday RM via Getty Images)
However, the report cautioned mortgage rates as a wild card to watch in 2025, saying future policy and economic uncertainties could cause mortgage rates to deviate from forecasts.
Daniel Hale, Chief Economist at Realtor.com, said, “As home prices remain high, housing affordability will be the make-or-break thing for many households, and mortgage rates are increasing, making it difficult for many buyers and sellers. “This will be a factor that will tip the scales.” he told FOX Business.
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Freddie Mac's latest primary mortgage market research, released last week, found that the average interest rate on popular mortgages is 30 year fixed mortgage is 6.81%.
While this is an improvement from the 7.22% average for long-term mortgages a year ago, many prospective buyers and sellers are still holding out. Roughly 80% of mortgage holders currently have interest rates below 5%, according to a Zillow study earlier this year.
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Mr Hale said the expected improvement in interest rates in 2025 will keep housing costs largely stable and, combined with rising incomes, should drive modest improvements in affordability, leading to a slight uptick in home sales next year. Ta.
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“While the gradual decline in mortgage rates will not support a major reset of the lock-in effect for existing homeowners, time and life events will likely reduce the proportion of mortgage balances below 6% by mid-2024. is expected to increase to 75% by the end of 2025, down from 84%,” Hale said.
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“If mortgage rate easing accelerates, we expect it to further support home sales growth, but if mortgage rates remain high, home sales will be suppressed.”
