Hoped-for rate declines haven't transpired in 2025, but all isn’t lost for those hoping to make a move in the housing market
Mortgage market watchers had hoped rates would slip in 2025, easing some pressures for borrowers and buyers alike – but that relief has yet to arrive as the year’s halfway point looms into view.
Far from dipping below 6%, the average 30-year US fixed mortgage rate is now flirting with 7% as unease about the Trump administration’s trade policies continues to roil Treasuries markets.
Some of those economic jitters are spilling into the housing market: April saw pending home sales, a measure of signed contracts for previously owned homes, fall by more than expected as buyers kept their purchasing plans on ice.
But homebuying activity isn’t exactly falling through the floor, either. Kristin O’Neil (pictured top), a senior loan officer with Open Door Lending in Virginia, told Mortgage Professional America there were still upsides as conditions tick back towards a buyer’s market.
“The bright side of it is that right now we’re seeing better terms on our contract,” she said. “We probably have more first-time homebuyers than we’ve had since 2020. And while we haven’t seen a huge drop in prices in our market, we’re definitely seeing a shift in terms of the offers that are being accepted.”
That means appraisals, inspections, and seller concessions are back on the table, while O’Neil said she’s even seen clients go under contract contingent on their sale – a rarity in the housing markets of recent years.
Those conditions are helping offset rising mortgage rates and stubborn home prices, which jumped by 7.2% in Richmond last month compared with the same time last year, according to Redfin.
Millennials are moving away from major metros in search of affordability. Mark Worthington of Churchill Mortgage and Samantha Shelton of Align Lending highlight how trust, tech, and flexibility are key to serving this generation. https://t.co/zoSJ3Faueu
— Mortgage Professional America Magazine (@MPAMagazineUS) May 28, 2025
Timing the market an impossible feat amid sticky rates
Affordability remains a huge concern for scores of buyers, especially with little sign of an imminent drop in rates (despite Fannie Mae’s expectation that they’ll fall closer to the 6% mark by the end of the year).
Still, while a jump towards 7% rates draws plenty of headlines, O’Neil said many buyers who’ve been waiting for the perfect time to move are resigning themselves to the reality that rates are what they are.
“At least in our market here in Richmond, over the last, say, six months we’ve seen an uptick in buyers who’d been waiting for the last year or two for rates to drop,” she said, “and I think they’re finally realizing that even if we do see a drop in rates later in the year, I don’t think it’s going to be as significant of a drop as what a lot of people were hoping.
“I think we could get back into the low sixes, maybe high fives, if we’re really lucky. But I think people are starting to realize that we’re not going to see rates in the low fours, low fives, anytime soon.”
Could other housing market developments impact buyer sentiment?
Plenty of recent speculation has surrounded a potential end to the conservatorship of Fannie Mae and Freddie Mac, while the Trump administration’s series of sweeping cuts to federal institutions and government departments has raised questions over whether affordability for first-time buyers could be under threat.
A Federal Housing Finance Agency (FHFA) sharply criticized a Bloomberg Intelligence report that suggested reductions in affordability support and assistance programs could harm the GSEs’ effectiveness in helping buyers.
Meanwhile, President Trump suggested again this week that he’s ready to start the process of bringing Fannie and Freddie public while keeping their US government guarantee.
Buyers are attuned to news about rates ticking back towards 7%, and less concerned – so far – about developments at Fannie and Freddie, according to O’Neil. “I haven’t got a ton of questions yet about Fannie and Freddie coming out of conservatorship,” she said. “I think yes, buyers are very conscious of the headlines.
“But the things that grab their attention are usually those rates going up or things like that. I think [Fannie and Freddie going public] is still pretty new. And we may be fielding those questions in the next couple of weeks – so that’ll be interesting to see how that plays an impact on the market, rates, all of that.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
