Mortgage Industry Outlook and Market Forecast for 2024 – 2025

The 2024 First-Time Home Buyer Handbook

The mortgage industry outlook for 2024 is mostly favorable, according to a new report from Freddie Mac (and other sources). The mortgage market forecast for 2024 suggests that we could see an increase in both purchase and refinance loan originations this year, partly due to lower interest rates and increased demand.

Here’s an in-depth look at the latest mortgage industry trends and outlook for 2024.

Mortgage Industry Outlook for 2024 – 2025

In January, the research team from Freddie Mac published a housing market and mortgage industry outlook. In addition to providing an update on current trends, their report offered a series of predictions for the mortgage market extending through 2024 and into 2025.

Let’s start with their predictions for the U.S. economy as a whole, which has a direct bearing on real estate and mortgage-related trends.

Economic Outlook for 2024 – 2025

The U.S. economy rebounded in 2023 largely due to strong consumer spending, which makes up the bulk of the U.S. economy and GDP.

But analysts predict that economic growth will slow in 2024 as consumer spending begins to taper off. The unemployment rate could creep upward this year as well. Both of these trends bear watching, since they directly affect the mortgage industry outlook.

Meanwhile, inflation in the U.S. continues to hover above the Federal Reserve’s target rate of 2%. Because of this, the Fed probably won’t reduce the federal funds rate anytime soon. Instead, they’ve decided to pause their previous rate hikes and have adopted a wait-and-see approach.

Even so, we could see some rate cuts into the second half of 2024, if inflation eases further. Freddie Mac’s economists “expect rate cuts in the second half of the year if the job market cools off enough to keep inflation muted,” according to their market forecast.

Mortgage and Housing Market

The mortgage industry outlook for 2024 suggests that home loan rates will decline a bit further over the coming months. In the Federal Reserve’s rate-cutting scenario described above, mortgage rates could hover in the low- to mid-6% range during the second half of 2024.

This in turn would spur the U.S. real estate market, leading to an increase in home sales and purchase loan volume when compared to last year’s figures.

But any growth in home sales will likely be limited by the ongoing housing market shortage that’s affecting most cities across the U.S. The demand for housing, on the other hand, will remain elevated in 2024 partly due to “Millennial first-time homebuyers looking to buy homes.”

All of these factors (strong demand and limited supply) will cause home prices in the U.S. to climb through the rest of 2024 and into 2025. Freddie Mac predicts that house values will increase by 2.8% in 2024, followed by 2.0% growth in 2025.

When this article was published in late January of 2024, the median home price in the U.S. was around $342,000 according to Zillow. Prices rose by 2.6% over the past year, and Zillow predicts they will rise by 3.5% over the next 12 months.

So, if we average these two forecasts (Freddie Mac and Zillow), house values in the U.S. are expected to rise by 3.15% during 2024. That would be a fairly “normal” rate of growth from a long-term historical standpoint.

More predictions from their mortgage industry outlook:

  • Purchase and refinance volumes are expected to increase in the housing market.
  • Higher home sales and price growth will drive up purchase origination dollar volume.
  • But purchase loan volume in 2024 will likely fall short of 2021 and 2022 levels, due to limited inventory.
  • The anticipated drop in mortgage rates will lead to an increase in refinance originations.
  • Homeowners with higher rates obtained during 2023 are likely to refinance in 2024.
  • But the millions of homeowners with rates below 6% have little incentive to refinance.
  • Overall, total origination volume is predicted to improve this year and into 2025.

A New Baseline for Mortgage Rates?

The graph below shows the average rate for a 30-year fixed mortgage loan over the past year or so. You can see where rates peaked at a 20-year high of around 7.8% in late October, followed by a steep decline through November and December.

The 2024 First-Time Home Buyer Handbook

On the far right (most recent) side of this graph, you can see how mortgage rates have settled into a new normal just above the 6.5% threshold. According to the latest mortgage industry outlook for 2024, rates could hover in this range for the next few months.

And if the Federal Reserve makes some additional rate cuts later in 2024, it could lead to a further reduction in home loan interest rates. All of this would bring more buyers into the market while increasing refinance activity at the same time.

For these and other reasons, we expect a busier spring home-buying season in 2024 compared to last year. So now is a good time for mortgage professionals to ramp up their marketing efforts.

HBI Offers Content & Marketing Support

The mortgage market forecast and outlook for 2024 – 2025 bodes well for mortgage brokers—especially those who gear up their marketing efforts. And that’s where we can help.

For more than 15 years, we’ve provided marketing support for mortgage brokers across the U.S. We help our clients increase their website traffic and visibility, to support their lead-generation efforts and overall business growth.

Check out our content marketing overview or email us your questions.

Disclaimer: This report is based on the 2024 mortgage industry outlook and market forecast provided by Freddie Mac. We do our best to add context to these forecasts, by weaving in current trends and historical perspective. But ultimately, these predictions come from a third-party source not associated with the Home Buying Institute. HBI makes no claims or assertions about future mortgage industry trends or market conditions.

Brandon Cornett

Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author