When Will Mortgage Rates Drop? Not for Years, Wells Fargo Says | Global News Avenue

Spring may come, but Wells Fargo economists have not melted much into the housing market.

Wells Fargo economists this week expect the interest rate on 30-year mortgages to be on average at 6.9% in 2025. average value Mortgage interest rate It was 6.7% last week after soaring above 7%.

“In our opinion, it will be a challenging environment in the next few years, because frankly, we don’t want mortgage rates to drop below 6%.”

Housing market returns to “new, old normal”

Although Wells Fargo believes the Fed will triple this year, they do not expect it to affect the cost of home borrowing. It follows the 2024 model when the Fed lowers interest rates by one percentage point in a year, but Mortgage rates are still highermainly due to the rise Ministry of Finance’s revenue.

Low rates, like those in the years before the pandemic, will soon return, said Jay Bryson, chief economist at Wells Fargo.

“Unless something disastrous happens to the economy, we seriously suspect you are looking for a 30-year fixed-rate mortgage of 3%,” Bryson said. “So, what we have is a new, old routine if you want. Interest rates are not zero economy. This is the economy many of us experience before the disaster of the global financial crisis and the pandemic.”

House prices rise, insurance costs reduce housing affordability prospects

The prospects are not particularly optimistic about other home purchase expenses.

“The main problem here is that has been weighing in the residential market for most of the past few years, which is extremely unfavorable for buyers,” Dougherty said.

House prices are expected to accelerate, with annual growth of 4.3% this year before rising in the second year, the report said. The rise in housing prices has cooled down In the last few months of 2024, it is below 4%. High price Damage to family salesSenior economist Charlie Dougherty said that the margin was about 22%.

Meanwhile, it is expected that home construction will remain in sync with today’s levels, which will not fill A shortage of about 4 million houses This hinders the market.

In addition, rising insurance costs are another cost that increases pressure on the housing market. Wells Fargo economists noted that S&P global data showed that home insurance costs increased by 10.4% in 2024, an acceleration of its average increase of about 3% between 2019 and 2022.

In addition, tariffs and immigration policies can also increase housing costs in the short term, although favorable tax and regulatory changes may help stimulate demand in the long term, economists say.