What a difference a year makes. Toward the end of 2023, mortgage rates fell nearly 150 basis points to usher in the new year.
Meanwhile, mortgage rates jumped about 100 basis points to close out 2024. Ouch!
In other words, things looked bright heading into 2024 and are looking a little bleak in comparison as 2025 approaches.
Despite this, the fixed term of 30 years is not that different from what it was a year ago.
Rates were actually neck and neck until they diverged in mid-to-late December.
Mortgage rate sentiment has deteriorated
At last glance, the 30-year fixed averaged about 7.07%, per Daily Mortgage Newsand 6.91%, by Freddie Mac.
According to Freddie, this is the worst average since July, which means that the 30-year period has been difficult.
Whether this portends relief soon is another question, but it’s certainly a stark contrast to late 2023 and early 2024.
A year ago, the 30-year fixed rate was finally starting to show signs that it had reached its ceiling and the worst was behind us.
After all, the 30-year fixed rate climbed to just above 8% in October 2023 and fell to around 6.625% by the end of the year.
So things were looking up as we approached 2024, largely because the Fed had indicated it was ready to pivot.
It was no longer going to raise its own federal funds rate, and the chances of a rate cut were now on the table.
This proved true, although it took about nine months for the Fed to finally act on this rate cut.
Lo and behold, the 30-year fixed rate started to rise once the Fed finally cut rates, which quickly confused everyone.
Today, prospective buyers face a mortgage rate that’s about a percentage point higher than it was just three months ago.
Will mortgage rates improve or worsen by spring?
Looking at the start of 2024, mortgage rates have actually rebounded higher after experiencing this sharp decline to the mid 6s from 8%.
Maybe it was too much of a good thing and just wasn’t sustainable. At the time we were still dealing with inflation and there were a lot of counterfeits.
The 30-year fixed rate fell to around 7.50% in April, putting a damper on the traditionally strong spring real estate market.
Ultimately (we’re still counting), 2024 could become the trough for home sales of this cycle.
All that talk about homebuyers rushing back hasn’t materialized. There was a theory that shoppers would strike early to “avoid the rush,” but that rush never happened. Instead, they were told to wait again.
Now the million dollar question; will things be different in 2025? Will homebuyers return this year?
This could depend on how mortgage rates move this spring. It could be argued that they should improve given the dramatic increase expected at the end of 2024.
The 30-year fixed rate was around 6% in September and rose to 7% on renewed inflation fears and a stronger-than-expected jobs report.
But history always shows that mortgage rates tend to decline for a while after the Fed’s pivot. And so far, they remain above pre-pivot levels.
Can homebuyers wait any longer?
So we know that mortgage rates will play a role here, as they always do. But another thing to consider in 2025 is patience of home buyers.
Many who wanted to buy a home last year may have hesitated after rates saw an unexpected rise.
This came as a bit of a gut punch after it appeared that rates were finally in the clear and falling back to more acceptable levels.
For these people, plans have been postponed for another year, even though life must go on. And as time goes by, everyone gets used to these higher mortgage rates.
Human psychology is at play and a rate that starts at 6% or even 7% is no longer a very scary rate.
We’re all used to it now. And we have all seen worse, with rates of around 8% at the end of 2023, as indicated.
The problem, however, is that accessibility remains historically catastrophic. Tariffs are only part of the problem, but not the whole thing.
You also have to contend with a high asking price, as well as costly property taxes and rising home insurance premiums.
Overall, the total housing payment (PITI) simply might not be enough, even if someone wants to become a homeowner today.
Either home sellers will need to get more serious and lower their asking prices, or we will need some relief from mortgage rates as spring approaches.
Otherwise, it will be another gloomy year for the real estate market, at least in terms of sales volume.
Continue reading: Mortgage Rate Forecasts for 2025: Where do they go from here?
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and existing) buyers better navigate the home loan process. Follow me on Twitter for hot takes.