M
ortgage rates ended 2024 on an ominous note, and the outlook for 2025 is uncertain. The average 30-year fixed-rate mortgage stood at 6.85% as of December 26, according to Freddie Mac. Despite the Federal Reserve's three interest rate cuts in 2024, mortgage rates remained relatively steady throughout the year, averaging 6.72%. This stability can be attributed to the bond market, which is not directly influenced by the Fed.

    The real concern for homebuyers and refinancers lies ahead. Analysts warn that multiple factors may keep inflation simmering in 2025, potentially leading to higher interest rates. The incoming administration's fiscal policies are a major contributor to this uncertainty. As Bright MLS Chief Economist Lisa Sturtevant noted after the November election, investors expect these policies to widen the federal deficit and reverse progress on inflation.

    Apollo Global Management's Torsten Slok estimates a 40% probability that the Fed will raise interest rates in 2025. This could lead to a repeat of 2022, with high inflation, rising interest rates, and falling stock prices. The housing market may not be immune to these developments, particularly if mortgage rates remain elevated. Analysts predict that homeowners will hold onto their low-rate mortgages, limiting the number of homes available for sale and keeping prices stable or even increasing them.