Mortgage Lending Trends for 2025

The beginning of 2025 didn’t do so well for the real estate market. Interest rates are higher this year than at the beginning of 2025. Because the rates are high, refinancing loan also dropped. However, there are changes expected on the horizon. Let’s take a look at what is expected this year in the mortgage lending market.

Home Prices Rise

Because there are more home buyers than houses for sale, the real estate market is a seller’s market. This means the demand for houses is high, and sellers can ask for more money and get it. It’s been this way for the past 6 years. Some of this is due to the fact that not enough new homes are being built to match the demand.

This makes it harder for buyers to find an affordable home but also it forces mortgage lenders to make a more competitive rate for their loans. A higher price in home means a higher loan price but mortgage companies still want to see some business. In order to survive a sellers’ market, mortgage companies must give buyers a competitive edge.

Smaller Homes

Because the price of homes is going up as are mortgage lenders rates, new homes are being built smaller to be more affordable. This ensures that the average consumer can still buy a new home but settle for a smaller square footage.

These new “starter” homes are perfect for first time buyers who don’t know if they will be living in this house forever. When the real estate market gets better, they may opt for purchasing a bigger home with a better interest rate.

Better Buys for First Time Buyers

Because the market is in a sellers advantage, people who already have a home aren’t really motivated to buy a new home. What would be the point of getting rid of their home when they may not even be able to get a better one at this time.

First time buyers are dominating the purchasing market because they still need a new home. The market hasn’t been in a perfect buying range for awhile now and those who have been putting off buying a new home are finding that time has run out. They don’t want to raise a family in a rental and so the demand is higher for first time buyers.

Lenders Are Easing Up

To make it where the mortgage lenders are still getting new loans, they are making it easier for people to qualify. This new standard of mortgages opens up the way to home ownership to people who may not have qualified before. Mortgage lenders are offering loans to people with lower credit scores than before. They are also offering loans with a smaller down payment. This can be a big obstacle for some potential home buyers that don’t have a lot of savings but are in the right financial stability to be able to afford a mortgage payment.

Adjustable Rate Mortgages Are More Popular

With the rise in rates, more home buyers are choosing to get an adjustable rate mortgage instead of a fixed rate mortgage. This means that when, or if, the real estate market tips in favor of the buyer, they will still be able to benefit from this and get a smaller mortgage payment with a better rate.

Even though the market isn’t in the buyers favor, you can still feel comfortable getting a mortgage loan for the home of your dreams. An adjustable rate mortgage may be a good option for you and remember you can still refinance later.

* This content is not provided by the financial institution or the offer’s provider. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and does not constitute a financial or expert advice.