The Fed’s Next Move Is Approaching—Here’s What It Could Mean for Mortgage Rates
With inflation still above target and job growth holding firm, the Federal Reserve is expected to hold interest rates steady at its next meeting, despite early-year hopes of multiple cuts. According to Investopedia, mortgage rates may remain elevated for longer than originally anticipated.
What to expect:
- Markets have largely priced out any Fed rate cuts until late Q3 or Q4 of 2025.
- Mortgage rates remain stuck between 6.7%–6.8%, with little downward movement unless the Fed turns dovish or the bond market rallies.
- Even if the Fed cuts rates later this year, mortgage rates may only drop modestly, as they are more closely tied to the 10-year Treasury and market inflation expectations.
Loan Officer Insight: The key message for clients? Don’t wait for the Fed to save the day. This is a strategy market—not a rate market. ARMs, buydowns, and smart budgeting are more valuable than chasing a perfect rate.
Delinquencies on the Rise for FHA and VA Borrowers
A new report from the Mortgage Bankers Association finds that serious mortgage delinquencies are increasing—particularly among FHA and VA borrowers, many of whom are first-time or lower-income buyers.
Key stats:
- FHA serious delinquencies rose 70 basis points over the past year.
- VA loans saw a 57 basis point jump, while conventional loans remained mostly stable.
- These loans now account for the highest default rates in the industry, a reversal from just two years ago.
What’s driving this trend?
- Inflation has outpaced wage growth for many working-class households.
- Rising insurance, taxes, and utility costs are pressuring monthly budgets.
- Borrowers who purchased at the peak of prices and rates in 2022–2023 have less financial wiggle room.
For LOs: Stay proactive with early borrower education and risk management. Reach out to borrowers in your servicing book, and help those struggling explore forbearance, modification, or restructuring options before they fall behind.
Refinance Rates Steady—But a Window of Opportunity May Be Opening
Despite rate volatility earlier this year, refinance rates have held steady, with small movements reflecting broader uncertainty in rate direction.
As of midweek:
- 30-year fixed refinance: 6.61%
- 15-year fixed refinance: 5.89%
- FHA/VA refinance options: hovering 6.45%–6.75%
What’s changing:
- There’s a modest increase in refinance applications, especially from borrowers who closed in late 2022–early 2023 when rates spiked past 7.5%.
- Homeowners looking to cash out or restructure debt are leading the trend.
- With HELOC rates still high, cash-out refis are regaining appeal for debt consolidation and home improvement financing.
Loan Officer Action: Pull past client data from Q4 2022–Q2 2023 and re-run scenarios. There’s likely a segment of your closed book that could benefit now—or in the next 30–60 days.
Home Construction Still Choppy Despite Strong Building Permit Activity
According to new data from the U.S. Census Bureau, March housing starts fell 14.7% month-over-month, despite a steady stream of building permits. It’s the latest sign of volatility in residential construction, even as builders express optimism.
Details:
- Single-family permits were up 1.5%, indicating potential growth in coming months.
- However, actual housing starts dropped sharply, reflecting labor shortages, regulatory delays, and continued materials costs.
- Builders remain focused on entry-level and affordable homes, but financing and zoning challenges are slowing shovel-ready project launches.
What to Watch: Builders are willing—but the process is slow. Expect continued inventory tightness, with new construction coming online slower than demand growth, particularly in suburban markets.
Real Estate-Related Stock Performance (as of April 24, 2025)
- Rocket Companies (RKT): $12.41 ▲ 0.8%
- UWM Holdings (UWMC): $4.62 ▲ 1.3%
- Zillow Group (ZG): $63.08 ▼ 0.2%
- Redfin Corp (RDFN): $9.02 ▲ 0.6%
- Lennar Corp (LEN): $106.14 ▼ 0.5%
- D.R. Horton (DHI): $122.33 ▲ 0.4%
- Equifax Inc. (EFX): $251.98 ▼ 0.7%
Builder and lender stocks remain active with refinance activity and housing start data fueling targeted investor moves.
Loan Officer’s Perspective: Thursday – Preapproved and Looking
It’s Thursday, and today’s focus is reaching out to your preapproved borrowers who are actively shopping.
How to add value today:
- Fed messaging: “The Fed’s likely staying the course—let’s look at what that means for your lock options now.”
- New construction pipeline: “Builders are trying to add homes, but it’s slow. Let’s keep you ready for quick-moving inventory.”
- Refi reminders: “If you closed around the peak rate period, it might be time to re-evaluate—want me to run the numbers?”
Don’t let preapprovals go cold. Your voice matters more now than ever.
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