“2025 Mortgage Trends: What Chicago Agents Are Forecasting for Buyers”

Insights from Industry Leaders:

Jeremy Collett
Chief Capital Markets Officer, Rate

Matt Horney
Senior Lending Manager, Chase Home Lending, Chicago

Timothy Tuz
SVP Capital Markets, Wintrust Mortgage

What Can We Expect for Interest Rates in 2025?

Timothy Tuz: Buckle up! It looks like interest rates are here to stay—at least for a while. I anticipate we’ll see them hovering in the high 5% to low 6% range for most of 2025. So, if you’re hoping for a dramatic drop, you might want to temper those expectations.

Jeremy Collett: Ever since Trump’s election, the market has been on a wild ride! With massive rallies in both stocks and cryptocurrencies, investors have flocked to higher returns, leaving the bond market a bit shaky. As for the Fed’s rate cuts, don’t hold your breath for anything drastic; we’re expecting only 50 to 75 basis points next year. So, while rates may dip, expect a slow and steady pace. I’d place my bets on 30-year mortgage rates staying in the 6s throughout 2025.

Matt Horney: Predicting the market feels like trying to catch smoke with your bare hands—it’s tricky! But with the Fed’s recent rate cut, there’s a glimmer of hope sparking demand in the homebuying sector. If we see further cuts, they’ll likely be gradual, signaling a robust economy—a win-win for housing stability!

Did you know that about 70% of mortgage debt is currently sitting below 5%? If rates start to slide, expect a shift in the lock-in effect. More buyers might consider jumping into the market, even if it means taking on a higher rate. As rates drop, the doors to homeownership could swing wide open!

What’s in Store for Lenders in 2025?

Collett: For mortgage originators, 2025 looks like a familiar landscape. The focus will be on controlling costs, embracing technology to cut origination expenses, and diversifying product offerings to navigate the challenges posed by prolonged elevated interest rates. Plus, we’ll need to keep an eye on the unpredictable impacts of tariffs and potential GSE reforms.

Tuz: The biggest roadblock? Inventory shortages—again! But there’s a silver lining: lenders can seize the opportunity to offer construction and renovation programs to assist buyers who are struggling to find that perfect move-in-ready home.

Horney: As rates drop, we’re already noticing a surge in refinancing demand. A modest 50-basis point cut opened the floodgates for many homeowners. If rates dip below 6%, that could mean around 4.7 million consumers will be eyeing refinancing opportunities. Lenders must gear up to handle this influx of activity!

This is the perfect moment for lenders to highlight the resources and tools they provide to empower both homebuyers and current homeowners. With initiatives like Chase’s homebuyer grant—offering up to $7,500 for eligible buyers across 15,000 communities—there’s never been a better time to make affordable homeownership a reality!

How Will AI Transform Mortgage Lending in 2025 and Beyond?

Horney: Get ready, because AI is set to revolutionize mortgage lending! The industry is still heavily reliant on paper, but AI promises to streamline processes and boost efficiency across the board. We expect AI to enhance underwriting, helping lenders evaluate creditworthiness more effectively. By 2025, AI will be essential in analyzing market trends, enabling lenders to provide resources that align with current conditions. While the full impact may take a few more years, the groundwork is being laid now.

Tuz: We’re already seeing a surge in AI adoption, as lenders aim to cut the high costs associated with loan origination. Expect AI to play a role at various points in the origination process, improving the borrower experience and speeding up approvals.

Collett: In 2025, I foresee AI making waves in compliance and underwriting. Its ability to sift through vast amounts of regulatory guidelines swiftly will be a game-changer for the origination process. There’s plenty of room for AI innovations, especially with tech like OCR stepping up in the non-QM market. The future looks bright!