Mortgage rates are expected to come down next year, but the decline is unlikely to be enough to provide relief for many would-be buyers in the U.S.'s ongoing affordability crisis.
Realtor.com's 2025 housing forecast released Wednesday predicts the benchmark 30-year fixed rate mortgage will average around 6.3% in 2025, falling slightly to end the year at around 6.2%.
However, the report flagged mortgage rates as a notable wildcard in 2025, saying that with policy and economic uncertainties ahead, mortgage rates could deviate from their forecast.
"As home prices stay high, housing affordability is going to be make it or break it for many households, and mortgage rates will be the factor that tips the scales for many buyers and sellers, too," Realtor.com's chief economist, Danielle Hale, told FOX Business.
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Freddie Mac's latest Primary Mortgage Market Survey released last week showed that the average rate on the popular 30-year fixed mortgage is at 6.81%.
While that is an improvement over the 7.22% long-term mortgages averaged a year ago, many would-be buyers and sellers are still holding out. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey from earlier this year.
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Hale said the anticipated improvement in rates in 2025 will keep housing costs roughly stable and, combined with higher incomes, will support modest improvement in affordability that will help home sales edge somewhat higher next year.
"The modest decline in mortgage rates will not support a big reset in the lock-in effect for existing homeowners, but time and life-events are expected to cause the share of outstanding mortgages under 6% to fall from 84% in mid-2024 to 75% by the end of 2025," Hale said.
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"To the extent that mortgage rates ease faster, we expect that to support more home sales growth, but if mortgage rates remain higher, that would hold home sales back."
