Rates were reduced by a quarter of a percentage point. (iStock )
The Federal Reserve has only cut interest rates once this year. At their recent meeting, the Fed decided to cut interest rates by a quarter of a percentage point, lowering them to 4.25% to 4.5%. This move was largely expected by economists.
The Fed cited indicators of a growing economy and a loosening labor market after other rate cuts. This is the third time rates have been cut this year, but economists don’t expect as many cuts in 2025.
“The average member now expects only two cuts in 2025 and the long-term federal funds target to be 3%,” MBA Senior Vice President and Chief Economist Mike Fratantoni said in a statement. “MBA predicts the Federal Funds Rate will only fall to 3.75% this cycle.”
The unemployment rate also remains low and inflation is making slow but steady progress toward the commission’s 2% target, both factors that were a sticking point in the eventual decision to cut rates.
“Although unemployment has risen over the past year and inflation has been on a downward trend, inflation has remained at a plateau in recent months,” Fratantoni said. “It was not surprising to see a dissent at this meeting, with one member voting to keep rates stable.”
With the latest rate cut, the Federal Reserve hopes to get closer to inflation growth and lower unemployment.
Worried about the state of the economy? You may consider paying off high-interest debt with a personal loan at a lower interest rate. Visit Credible to speak with a personal loan expert and get your questions answered.
INFLATION SEEING THE LOWEST ANNUAL INCREASE SINCE 2021
Home sales are likely to increase in 2025
The housing market has been on a rollercoaster year, but certain aspects are expected to boost home sales in 2025. Real estate experts predict a slow thaw in mortgage rates, giving potential buyers who have been priced out of the market in recent years more room to move.
Many housing market measures are moving closer to historical norms and are showing signs of an improved market in the new year. The number of listings is still lower than before the pandemic, but they are significantly more than in March, when there was a 25% shortage, according to Zillow.
However, buyers shouldn’t expect a completely smooth path to their purchase in 2025. For many, 2025 looks eerily similar to the volatile market of 2024.
“There’s a strong sense of déjà vu for 2025. We again expect mortgage rates to gradually improve and opportunities for buyers to follow, but be prepared for plenty of setbacks along that path,” said Skylar Olsen, Zillow’s chief economist. .
Shoppers looking to move during the slower winter months have an advantage. Sellers who have been waiting for a drop in interest rates may want to vacate their homes as interest rates fall.
“Those shopping this winter will have plenty of time to choose and a relatively strong position in negotiations,” Olsen said.
If you’re looking to buy a home, consider turning to Credible to find the best mortgage rate for your financial situation.
THE US ADDED 818,000 FEWER JOBS THIS YEAR THAN ORIGINALLY ESTIMATED
Mortgage rates and house prices are expected to fluctuate in the coming year
There may be more deals on the horizon, but buyers shouldn’t expect a bottom in mortgage rates anytime soon. Prices will not drop yet either. Prices are expected to rise 3.7%, Realtor.com recently reported.
Mortgage rates are also expected to remain around 6%, with fluctuations throughout the year, similar to 2024. As a result of these small improvements, the number of single-family homes is expected to grow by almost 14%, according to Realtor.com.
Sellers in certain highly sought-after areas will still have the power in 2025. Inventory is improving, but still limited compared to recent years. This gives sellers the upper hand when negotiating prices.
How the latest presidential administration will impact the housing market recovery process is difficult to predict, but there is the potential for a “Trump Bump,” as Realtor.com calls it.
“While President-elect Trump can quickly work with his administration to make some regulatory changes, other policies that will impact housing, such as tax changes and broad deregulation, will require the cooperation of other branches and levels of government,” he said. chief economist of Realtor.com. said Danielle Hale.
“The size and direction of a Trump bubble will depend on which campaign proposals ultimately become policy and when,” Hale said. “For now, we expect a gradual improvement in housing market dynamics, driven by broader economic factors. The new administration’s policies have the potential to strengthen or hinder the housing market recovery, and the details will matter.”
If you think you’re ready to take out a mortgage, use Credible to help you easily compare interest rates from multiple lenders in minutes.
FHFA ANNOUNCES HIGHER MORTGAGE LOAN LIMITS FOR 2025
Do you have a financial question, but don’t know who to ask? Email the credible money expert at moneyexpert@credible.com and your question may be answered by Credible in our Money Expert column.
