Mortgage Rates Are Up—What Does It Mean for You?

Lisa Mailhot  |  January 14, 2025

Buyers

Mortgage Rates Are Up—What Does It Mean for You?

 

As we step into the new year, rising mortgage rates are putting the brakes on market activity. With 30-year fixed rates nearing 7%, the Mortgage Bankers Association (MBA) reports that purchase applications have dropped to their slowest pace since February 2024.

Joel Kan, MBA Deputy Chief Economist, highlights that higher rates are discouraging buyers, stating:

“Applications decreased last week as rising mortgage rates continued to discourage buyers from entering the market.”

Mortgage Applications: A Closer Look

Purchase Loans

  • Seasonal Drop: Applications for purchase loans fell by 7% week-over-week and are down 15% compared to the same time last year.
  • Impact: Rising rates are forcing many buyers to delay their plans, resulting in weakened demand.

Refinancing Activity

  • Slight Uptick: Refinancing applications rose 2% during the first week of January but remain 6% lower than a year ago.
  • Notable Trend: The increase was driven largely by VA refinances. VA loans are government-backed loans for eligible veterans, active-duty military members, and certain surviving spouses. These loans often offer lower interest rates and no requirement for private mortgage insurance, making refinancing an appealing option even in a rising-rate environment.

Why Are Mortgage Rates Rising Again?

Since hitting a 2024 low of 6.03% in September, rates have climbed nearly a full percentage point. Factors contributing to this increase include:

  • Federal Reserve Policies: Despite rate cuts in late 2024, the Federal Reserve has signaled caution in further reductions. Minutes from the December meeting indicate no imminent cuts are planned.
  • Economic Concerns: Bond market investors are concerned about inflationary pressures from new economic policies, including proposed tariffs and tax cuts. These policies could drive up costs and reignite inflation.
  • Market Sentiment: Investor predictions suggest only modest rate cuts in 2025, reflecting an expectation for gradual economic recovery.

 

Consumer Sentiment: Is It a Good Time to Buy?

Surveys by Fannie Mae show Americans are slightly more optimistic about the economy compared to last year. However, only 20% of respondents in December believed it was a good time to buy a home. Rising prices and high mortgage rates remain significant barriers, particularly for first-time buyers.

What’s Ahead for 2025?

Despite a challenging start, experts see room for optimism:

  • Soft Landing Expected: Many forecasters predict the economy will avoid a sharp downturn, leading to stable home prices and mortgage rates settling around 6%.
  • Regional Variability: Sales trends will vary widely, with some regions faring better than others depending on local demand and inventory levels.
  • Gradual Rate Reductions: Economists expect the Fed to lower rates incrementally throughout the year, potentially creating opportunities for buyers and sellers to re-enter the market.

Bottomline

While rising rates have cooled mortgage demand, the long-term outlook offers hope for stability. Whether you're planning to buy, sell, or simply stay informed, understanding these trends is key. Ready to explore your options in the 2025 market? Let’s talk and find the right strategy for you!

 

 

Reference: Carter, Matt. "Mortgage Demand Crumbles as Rates Are on the Rise Again." Inman, January 8, 2025.

RECENT BLOG POSTS

What the AFFH Repeal Means for Homeowners & Buyers

The Department of Housing and Urban Development (HUD) is repealing the Affirmatively Furthering Fair Housing (AFFH) rule, a policy designed to address housing discrimi… Read more

Can You Really Pay Your Mortgage With a Credit Card?

Thinking about paying your mortgage with a credit card? While it might sound convenient, there are risks and rewards to consider. In this blog, we dive into why it's b… Read more

Late May Listings Lead to Larger Profits

Discover the prime time to list your home for sale in Orange County with insights from Zillow's latest report. Late May emerges as a golden window, promising significa… Read more

Will Falling Mortgage Rates Finally Ignite the Housing Market?

Mortgage rates are falling, but is it enough to jumpstart homebuyer demand? Inventory is growing, but pending sales remain sluggish. Explore the latest housing market … Read more

Why Retirees Are Moving to Lower-Tax States

Soaring property taxes in states like New York, Illinois, and Texas are pushing retirees to more tax-friendly areas in the South and West. With affordability and quali… Read more

The 2025 Home Improvement Playbook: Upgrades That Add Value & Comfort

Thinking of selling your home—or just want to enjoy it more? 2025 home renovation trends focus on comfort, electrification, and curb appeal. From kitchen remodels to b… Read more

The Secret Weapon to Selling Fast: Mastering the Art of Home Staging

Want to sell your home for top dollar? Staging isn’t just about making a space look pretty—it’s a powerful marketing tool that can dramatically impact how buyers perce… Read more

Zombie Foreclosures Are Slowly Creeping Back

Zombie foreclosures are seeing a modest rise, with over 7,000 vacant pre-foreclosure homes across the U.S. Explore what zombie foreclosures are, why they’re increasing… Read more

Palisades Land Boom: A Golden Opportunity for Investors and Homebuilders

The Palisades real estate market is heating up as wildfire-affected lots hit the market, with experts predicting up to 750 listings in the coming years. With land pric… Read more

We are excited to assist you in finding your perfect home

Let's find a time that suits you best to chat about your goals, show you how we work, and figure out how we can help you the most