Will Mortgage Rates Finally Go Down in 2025? | Mortgage Rate Forecast 2025

I'm excited about 2025 and I hope you are excited too. So let's talk about where mortgage rates are headed and where home prices are headed in 2025. I'm Shahida Hill getting you over the hill to home ownership and helping you confidently buy your first home. So we have a lot of new changes going on in the mortgage rate market, home prices. We have a new, um, administration coming in. So there's a lot of things that can happen in this first half of 2025. And so I think it's something to be aware of something to be excited about. This could help or it could bring prices up. So you just want to have a level of awareness, be it deportations, tariffs, the fed, um, reducing interest rate or cutting interest rates. All of those things will impact home buying in 2025, but I want to go over where people are predicting rates to be in 2025. So first we're going to start with, we're going to talk with the national association of realtors, what they're saying, Fannie Mae, the mortgage bankers association. And I'm going to tell you some opportunities that I see in the 2025 market. So the mortgage banker association, they call it, they, you know, the abbreviation is MBA. They're saying the average rate is going to be about 6.2 in 2025. So, you know, on average, it might go mid and might go lower, but on average 6.2 and they're also, they're predicting a 1.5 increase in home values. So not super high, pretty much. If you can afford a house at the beginning of the year, you'll be able to afford a house at the end of the year, depending on what you want to buy. And just so we'll know the current interest rates, this is in like mid December. The current FHA rate is 6.19%. The current conventional rate is 6.84%. And you'll find that conventional rates, these are averages of all rates, but you'll find that FHA is about a half of a percent lower typically than conventional rates. And we'll talk about that as an opportunity after I go over all of the predictions. So Fannie Mae is, um, forecasting that home prices will go up 3.6% in 2025. And they're also predicting a mortgage interest rate at about 6.3%. So that's where they are. And then the National Association of Realtors, they're saying anywhere at the beginning of the year, 6.3 at toward the end of the year, 6.2. And that prices will increase kind of the same as Fannie Mae about 3.6% So we're not that far from where we are now. So if you can afford a house now you'll be able to afford a house in 2025. Um, you just want to be mindful for any swings in these rates, depending on what happens with like every month, the jobs report comes out, the CPI, the consumer price index comes out. So all of those things can't impact where mortgage rates are headed. So it'll be a month to month as to where, but they're predicting based on fed rate cuts, what's happening with the new administration, that things will pretty much stay pretty stable to where we are now. So let's talk about the opportunities that you could have in 2025. The first opportunity is FHA. So if you're thinking, I was only going to be doing a conventional loan, um, that's all that was on your mind. You definitely want to get pre-approved for both in 2025. You want to see what it looks like to do an FHA mortgage and then what it looks like to do a conventional mortgage. Now a lot of people swing toward conventional because, um, after a certain amount of time, once you gain that 20%, if you're not putting 20% down initially, when you get to 20% equity in your home, you get to get rid of your mortgage insurance. And a lot of people want to get rid of that. Now, FHA, mortgage insurance stays with you for the life of your loan. However, the government under the Biden administration reduced the mortgage insurance premium. So it may not be enough to stop you from not doing an FHA loan. So you really want to compare the two and see which one makes the most sense for you. Long-term. The second thing I want to bring up is that sellers are contributing to your, to your closing costs. A lot of sellers are because, because interest rates are so high in some areas, we're really entering more of a balanced market. It's not a true seller's market in a lot of areas. So sellers are contributing. Definitely. Um, new construction builders are contributing to your closing costs and they're buying down your rate. But if you're doing a resale, you can have the resale seller contribute to your closing costs. They're sitting on a lot of equity right now, so they can contribute and that could buy down your rate. So you're not paying the higher interest rates. So just make sure you're having that strategy and thinking about that with your agent and your lender ahead of time. And then the last one is something called a silver tsunami. So baby boomers are pretty much between 60 years old and 78 years old. Most of them are homeowners and a lot of them are getting rid of, or they're downsizing from the home that they, you know, raise their family in. And then they're putting that home on the market either to move in with family, move closer to family, or perhaps go into like assisted living, that sort of thing. So you want to make sure that you're not overlooking some of these baby boomer homes. The disadvantage of these homes, a lot of them haven't updated their homes and probably the last 15 or 20 years. So they have some dated, um, cosmetics, but again, they're dated just cosmetically. So you always can repaint, change fixtures, change flooring, and you really have a really good house. So look at some of those homes. Don't just overlook them because on Zillow and on realtor.com they're not the most visually appealing homes. You do have a lot of opportunity with some of these baby boomer properties. Thank you so much for watching. Put any questions in the comments. I'm looking forward to 2025. Please stay with me and subscribe to me as you go through the home buying process in 2025. Thank you so much.