Mortgage Rates Drop: Impact on Buyers & Investors
After two years of record-high borrowing costs, homebuyers and investors in 2025 are starting to see signs of relief. While mortgage rates remain elevated, they’ve begun to soften — sparking cautious optimism for the housing market’s future.
Mortgage Rates in 2025
In July 2025, the average 30-year fixed mortgage rate fell to 6.58%, its lowest point of the year so far, according to Freddie Mac. That’s still well above the 6% mark, but a meaningful improvement from the 7%–plus rates that dominated 2023 and early 2024.
This dip has been enough to bring some buyers back into the market, particularly first-time buyers who had been priced out during the peak rate cycle. For investors, the rate movement has reopened conversations about refinancing and acquisition strategies.
Looking Ahead to 2026
According to Fannie Mae’s July 2025 Economic and Housing Outlook, mortgage rates are projected to decline to around 6.4% by the end of 2025, and then reach approximately 6.0% by the end of 2026.
For buyers and investors, this signals a gradual improvement in affordability and financing options over the next 18 months. While rates are unlikely to return to the historic lows of 2020–2021 anytime soon, even small declines can make a major difference in monthly payments and deal feasibility.
What This Means for Homebuyers
- Improved affordability: Even a half-point drop in mortgage rates can save buyers hundreds of dollars each month.
- Increased competition: As rates fall, more buyers will re-enter the market, potentially reigniting bidding wars in supply-constrained areas.
- Timing the purchase: Deciding whether to buy now or wait for further declines requires analysis, not guesswork.
Investor Considerations
For real estate investors, the current market presents both opportunities and challenges:
- Rental demand remains strong: Many households are still priced out of ownership, sustaining demand for rentals.
- Cap rate pressure: Lower borrowing costs can lift asset prices, compressing yields.
- Refinancing potential: Holders of higher-rate loans may find opportunities to refinance into more favorable terms as rates trend downward.
How CPAs Can Help
As mortgage trends evolve, working with a CPA can help both homebuyers and investors make informed decisions:
- Cash flow modeling: Project how future rate changes may impact affordability or returns.
- Depreciation & cost segregation: Rising property values make strategic tax planning more important than ever.
- Capital gains strategy: Plan ahead to minimize exposure, including options like 1031 exchanges.
- Refinancing analysis: Weigh the costs of refinancing against long-term savings with careful number-crunching.
At Shahbaz & Associates, we help homebuyers and real estate investors make sense of changing markets—providing the tax strategies and financial clarity needed to turn uncertainty into opportunity. Schedule a strategy session today to make the most of 2025’s interest rate environment.