How Low Mortgage Rates Impact Home Sales and Refinances

This guide covers how low mortgage rates impact home sales and refinances. As everyone is familiar with, mortgage rates are at historic highs. Thanks to the election of our new President, President Donald J. Trump, there is hope the housing and mortgage markets will stabilized and rates will stabilized to lower levels. If everything President Donald Trump turns out and mortgage rates get lower, what is the impact on home sales and refinances? What is the effect of low mortgage rates on home sales and refinances in 2025.

Mortgage rates tend to fluctuate across each decade. However, the rates of early 2025 remain the primary causation for home sales and refinancing activities. With housing affordability being an utmost challenge for numerous citizens of America, the federal reserve’s interest rates in addition to lender policies have a significant impact on how the market moves. The following blog discusses the how the current mortgage rates impact home sales and refinancing, compares current trends with historical data, and predicts the forward looking insights for homeowners and potential homebuyers.

The State of Mortgage Rates in 2025 and How Mortgage Rates Impact Home Sales

• Current Trends on Mortgage Rates: Currently, in February of 2025, the average 30-year fixed mortgage rate is at approximately 6.75%, considerably lower than the 7% plus rates of 2023.
• Federal reserve influence: The period of aggressive rate increase in 2022 and 2023 followed the recent shift of the Fed in 2023 towards rate stabilization, which has helped homebuyers.
• Homebuyer Demand: The low rates additionally tend to increase the number of buyers that enter the market which heightens the competition for the limited housing stock.

How Low Mortgage Rates Impact Home Sales

• Market Activity: For NAR, in January of 2025, the home sales for the year beat the prediction at 15%. This can be credited to the buyers capitalizing on the bettered mortgage rates.
• Although there is little supply available, the acceptance of lower rates has made marginal improvements in affordability. This coupled alongside high demand keeps median home prices at a high value.

Low Mortgage Rates Impact Fast Home Sales Process

Properties are now selling, on average, within 45 days compared to the 60 days in early 2024. Many buyers are once again willing to bid over the asking price for homes located in sought after states such as Texas, Florida, and Arizona.

Government Loan Programs Making Homeownership More Accessible:

Aggressive lending programs such as FHA, VA, and USDA are still providing loans with minimal down payments. More and more first-time buyers are taking advantage of Fannie Mae and Freddie Mac’s 3% conventional loan programs which do not require significant down payments.

Low Mortgage Rates Impact Home Sales and Refinance Boom

• Current homeowners with mortgages secured in 2022 and 2023 are now able to refinance into lower fixed-rate loans which is highly beneficial considering the rates were above 7%.
• An increase in cash out refinances is evident as homeowners aim to leverage equity in their homes to wipe out outstanding debts or make capital improvements.

Mortgage Rates Impact Home Sales and Refinancing: Types of Refinancing Options

• Rate-and-term refinance – This allows the exchange of a higher interest loan with a lower-rate mortgage.
• Cash-out refinance – This allows conversion of home equity into cash for expenses or to make investments.
• Streamlined FHA or VA refinances – more qualified homeowners are likely to benefit from these because they come with fewer requirements and lower costs.

Housing Market Outlook for 2025

Home Price Growth

• Demand coupled with decreased interest rates is expected to propel home prices forward by approximately 3-5% in 2025.
• Markets in Tennessee, Texas and the Carolinas are experiencing the greatest price appreciation because of the migration rates.

Low Mortgage Rates Impact Home Sales Affordability Challenges

Stricter rates have reduced inventory, pushing prices up further which makes home buying, especially for first-time buyers, very difficult.

New Construction Trends

In an attempt to remedy supply shortages, builders are increasing the pace of multi-family housing developments and starter home constructions.

Tips for Homebuyers and Homeowners

For Homebuyers

• To protect oneself from a future market change, get pre-approved as soon as possible.
• Explore down payment assistance programs offered to first-time buyers.
• Be ready to face competition in hot markets.

Low Mortgage Rates Impact Home Sales For Home Owners Looking to Refinance

• Determine if your current interest qualifies you to refinance your location.
• Consider Streamline with FHA or VA IRRRL for easy paperwork.
• Be prudent with the equity, consider consolidation with debt or home improvements through a cash-out refinance loan.

2025 continues to experience low mortgage rates which are encouraging both home purchases and refinances. This is a good scenario for both buyers and homeowners. While affordability is still a challenge because of inventory bottlenecks, strategically prepared clients can take advantage of the market. Consulting with a professional lender can be beneficial, as they know how to best navigate different mortgage options.

For personalized mortgage advice, call GCA Forums at 800-900-8569 or email gcho@gustancho.com.

Archive Article: Low Mortgage Rates Impact Home Sales and Refinances (2018)

(This blog post from 2018 is left unaltered for archival reasons.)

Archived Article: Low Mortgage Rates Impact Home Sales and Refinances (2018)

(For archival purposes, the original 2018 blog post is preserved here.)

This Article Is About Low Mortgage Rates Impact Home Sales And Refinances

Home sales are strong.

• Just under 5 million homes have sold in the month of February of this real according to the National Association of Realtors
• This kick-started a strong home buyer’ market for the new year
• With the combination of home values still not recovered from the 2008 real estate market and credit collapse and mortgage rates still at an all-time 3 year low, home sales are increasing every month with no sign of slowing down
• This holds true despite rumors and talks of that interest rates may be rising later this year into 2020
• Also, HUD, VA, USDA, Fannie Mae, and Freddie Mac all have lowered mortgage guidelines with regards to credit, debt to income ratios, and waiting periods after bankruptcy and foreclosure to stimulate home buyers to become first-time homeowners
• Statistics show that the days that homes in the United States remain on the market has dropped to 62 days which is 10% fewer days in the market than the beginning of 2019
• This is the fastest days in the market a home remained on the market in the past six months

In this blog, we will discuss how Low Mortgage Rates impact home sales and refinances.

How Low Mortgage Rates Impact Home Sales

Mortgage rates on 30 year fixed rate mortgages are at a two year low. How much can mortgage rates go down? If you are a seasoned home buyer or a first time home buyer, right now is a great time to think of buying a home. With lenient mortgage lending guidelines, low mortgage rates, home values on the rise, and the reduction of mortgage insurance premium, the home buying and mortgage market is hot. Add the revitalization of Fannie Mae and Freddie Mac’s 3% down payment on a home purchase conventional loan program, the dream of homeownership has never seen so many positive factors than ever before. Home prices are increasing due to multiple offers on a home in the market and the shortage of home inventory in all parts of the country. According to the National Association of Realtors, 34% of the homes listed in February has sold in thirty days or less on the market. Typically, March and September are the best months for home sales. Another major factor of why home sales are spiking up and expected to do so the next few months is because mortgage rates have been the best since May 2019.

Low Down Payment Requirements And Low Mortgage Rates Impact Home Sales

Minimum down payment for FHA home buyers is 3.5% down payment and minimum down payment for conventional loan home buyers is 3% down payment. VA Loans do not require a down payment and neither does USDA loans. No closing costs for home buyers if they get a sellers concession or a lenders credit. Down payments can be gifted by family members and/or relatives. This only holds true as long as the gift funds do not have to be paid back.

How Low Mortgage Rates Impact Home Sales and Loan With Bad Credit

Minimum credit scores to qualify for a 3.5% down payment FHA insured home loan is 3.5%. Home buyers with prior bankruptcy and/or foreclosure can qualify for a home loan with bad credit. There is a mandatory waiting period of 2 years after bankruptcy discharge to qualify for an FHA home loan. There is a three-year mandatory waiting period to qualify for an FHA loan after a foreclosure, deed in lieu of foreclosure, or short sale. VA requires a two-year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. USDA requires a three-year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short-sale. The VA does not have a maximum loan limit cap on VA Loans. There is a four-year waiting period after bankruptcy, deed in lieu of foreclosure, a short sale on conventional loans. There is a seven-year waiting period to qualify for conventional loans after a foreclosure

Credit Score Requirements For Conventional Loans

Minimum credit scores to qualify for a conventional loan is 620 FICO.

• Minimum down payment to qualify for a conventional loan is 3% down payment for a first time home buyer or a seasoned home buyer who did not own a home for at least 3 years
• Standard down payment requirements for a conventional home purchase loan is 5% down payment

If you have had credit issues and need a home loan, please contact me at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. The team at GCA Forums are national mortgage brokers and correspondent lenders with no overlays on government and conventional loans and can help you get approved for a mortgage loan. If you have any questions about this guide on mortgage rates impact home sales, please contact us at GCA Forums Mortgage Group.

This guide on mortgage rates impact home sales was updated on February 10th, 2025.