Costs, Inflation, Rates To Remain Challenging In 2025
By ERIN FLYNN JAY
It is predicted that the major challenges for the mortgage industry in 2025 will be costs, inflation, and interest rates.
Reed Letson, mortgage broker and owner of Elevation Mortgage in Colorado Springs, Colorado, said homes are becoming more unattainable due to affordability issues.
“With home costs plus higher interest rates, the amount a family has to pay each month for a mortgage is getting higher than what the average family can afford,” he said.
For example, Letson said for a home purchase at $400,000 using an FHA loan, the payment would be over $3,000 a month with everything included. And with rising inflation plus potential tariffs, the cost of goods may skyrocket, making homeownership more costly.
Antwyne DeLonde, Founder and CEO at VisionX, agrees that rising interest rates are one of the biggest hurdles for homebuyers, making monthly payments less affordable and causing current homeowners to hold onto their low-rate mortgages, which keeps housing inventory tight.
“Inflation is also pushing up construction costs, making new homes pricier and limiting options for many buyers,” said DeLonde. “Combined, these factors could make homeownership even harder to achieve for first-time buyers.”
Technology has the potential to make the mortgage process smoother and more accessible.
“Automated underwriting tools can help lenders process applications more efficiently, while digital platforms make gathering and submitting documents less stressful for borrowers,” said DeLonde. “For buyers, tech-driven tools can increase transparency, helping them understand their options and make more informed decisions about their financing.”
Letson said technology can both streamline the process and drive down costs.
“If you are able to eliminate the high-paying commissions of loan officers with technology, this will drive down the costs of loan origination,” he said. “This will happen by building out software that can interpret underwriting guidelines through coding, artificial intelligence, and data extraction. The need for a highly skilled loan officer will go down dramatically as a majority of the role is determining if a borrower qualifies based on guidelines.”
Matt Schwartz, Founder of VA Loan Network in San Antonio, Texas, said that AI tools can speed up loan approvals and make them fairer.
He added that blockchain might make the messy title process easier, while digital closing tools are saving time and money for everyone involved.
At the end of the day, though, it’s about balance.
“People want streamlined options, but they also need someone to explain the process when things get confusing,” said Schwartz. “Blending smart tech with personal support is going to be the key to keeping the mortgage market moving forward.”
What is the prediction on mortgage rates?
Seamus Nally, CEO of TurboTenant in Fort Collins, Colorado, said mortgage rates are affected by a variety of different factors, so it’s often a bit difficult to accurately predict what they will be like in the future.
For example, with the recent Fed rate cuts, Nally said people were expecting those to cause mortgage rates to decline, but that didn’t happen.
“Right now, mortgage rates seem to be a lot more affected by the general state of the economy,” said Nally. “So, in 2025, that’s going to be one of the most influential factors for the mortgage industry. With Trump entering office, the economic policies he implements may have a big impact on mortgage rates. The proposed tariffs, for example, could cause increased inflation, in which case that could make mortgage rates rise.”
So it appears that the future is uncertain. But there are things loan officers can do today to improve the chances of success for their buyers.
DeLonde said, “encouraging clients to focus on budgeting, building strong credit, and preparing for rising costs is key to helping them navigate these challenges.”