Mortgage Rates Surge 0.35% in March 2025, Housing Market Faces Challenges

Mortgage rates in the United States have been on a steady upward trajectory, with the average refinance rate for a 30-year, fixed-rate home loan reaching 6.82% as of March 27, 2025. This increase is part of a broader trend of rising mortgage costs, which have posed significant challenges for the housing market. For instance, the 30-year FHA mortgage rate averaged 5.94% on March 25, 2025, marking a rise of 0.09 percentage points from the previous day. Similarly, the 30-year jumbo mortgage rate saw an increase of 0.35 percentage points, reaching 7.06%.

Housing market experts anticipate that this upward trend in mortgage rates will persist, with rates expected to remain high throughout 2025. According to these experts, the rates are likely to gradually ease as the year progresses. This forecast is grounded in the current economic conditions and the broader financial landscape, which have contributed to the rising cost of borrowing for homeowners.

The impact of these rising mortgage rates is already evident in the housing market. While new single-family home sales increased by 1.8% in February 2025, the market continues to face significant challenges. The rising cost of mortgages has made it more difficult for potential homebuyers to afford a new home, leading to a slowdown in the housing market.

Despite these challenges, the rental market shows signs of resilience. The latest data indicates a continuing decline in property prices, but rental prices have shown an upward trend, approaching historical highs. This trend is supported by strong demand from various tenant groups, including professionals and students. The rental yield for Class A units in January 2025 was 3.6%, slightly higher than the current mortgage interest rate of 3.5%. This suggests that rental income is increasingly sufficient to support mortgage repayments, particularly for smaller units.

The upward trend in mortgage rates is expected to continue, with experts predicting that rates will remain high throughout 2025. This trend is likely to have a significant impact on the housing market, making it more difficult for potential homebuyers to afford a new home. However, the rental market shows signs of resilience, with rental prices continuing to rise and rental yields exceeding mortgage rates for smaller units. This suggests a favorable outlook for both landlords and prospective investors in the residential property market.