Hot NewsMortgage Rates & Affordability
Michael Delano | January 28, 2025
January 2025 is just about a wrap! And in my world, there is no shortage of buzz about where mortgage rates are and where they are heading. Unfortunately, rates while important, are the emotional aspect of this process, and they really should not be the focal point of the decision, but far too often, they are the only point in the decision to buy or to rent.
The Real Focus: Affordability When it comes to buying a home, affordability is what truly matters. Rates are just one piece of the puzzle, focusing solely on them can lead to missed opportunities. Affordability takes into account your monthly payment, your financial goals, investing, date nights, just an overall bigger picture of what makes sense for your family. Taking all into consideration, home prices, budget, current market conditions and long-term goals often has a greater impact on your buying power than the rate alone.
The Current Landscape After a year filled with volatility, 30-year fixed mortgage rates have recently shown signs of stabilizing and (fingers crossed) easing. While still elevated compared to historic lows, rates have come down from their peaks, providing a bit of relief. This reflects a combination of easing inflation pressures and the Federal Reserve’s evolving stance on the Federal Fund Rate.
Why Affordability Matters More Than Rates Even with higher rates, the monthly payment on a home can often be managed through creative solutions such as:
1. Adjusting Your Budget: Prioritize what truly matters in your monthly expenses to make room for homeownership.
2. Exploring Loan Options: Work with a professional (me…) to find products that align with your financial situation—such as adjustable-rate mortgages, rate buydowns, or assistance programs.
3. Negotiating Smartly: Home prices and seller concessions can significantly impact your affordability equation. The current market is providing opportunities to negotiate. Work with a professional full-time realtor-it is worth it!
What to Expect in the Next 3-6 Months The short-term outlook for 30-year fixed mortgage rates suggests modest movements rather than dramatic shifts. Here’s what to keep an eye on:
1. Inflation Data: If inflation continues to trend downward, we could see further downward pressure on rates. Conversely, any surprises in inflation reports may cause temporary spikes.
2. Federal Reserve Policy: The Fed’s communication will remain a critical driver of market expectations. The consensus points to a few more rate cuts by in 2025. (disclaimer) If economic conditions warrant.
3. Economic Resilience: The broader economy—particularly employment data and GDP growth—will also play a role. A strong economy could keep rates elevated, while signs of a slowdown might encourage more favorable borrowing conditions.
4. Housing Market Dynamics: While buyer demand remains strong in our market, we still have affordability and inventory challenges. Slight improvements in rates could get sidelined buyers/sellers to re-enter the market, balancing out supply and demand pressures.
Advice for Homebuyers and Homeowners For prospective homebuyers, the current environment calls for strategic planning. If rates trend lower in the months ahead, this could open opportunities for those who have been waiting for more affordable payments. At the same time, buying now with the intention of refinancing later could be a viable strategy, particularly as competition for homes will intensify as rates dip, causing home prices up or at least, offers to exceed list price.
For current homeowners, refinancing may become more attractive in the second half of the year if rates improve further. However, keeping a close eye on market conditions and working with a knowledgeable mortgage professional (me again…) can help you time this move effectively.
Final Thoughts While uncertainty always exists, my muddy crystal ball tells me mortgage rates, in the near term, will fluctuate in a very small window. Keep in mind, it’s not just about rates—it’s about what you can afford and how it fits into your broader financial picture. By focusing on affordability and working with trusted professionals (guess who?), you can make confident decisions that align with your long-term goals.
Let’s connect if you have questions about your mortgage options or the market outlook. I’m here to help you navigate these waters with confidence.
Scott Davis, Regional Vice-President (NMLS 166596)
Fidelity Direct Mortgage, LLC (NMLS 188829)
