2025 Homebuying Made Easy: Market Trends and Preparation Strategies

If you’ve been watching the news lately, you’ve probably seen a lot of headlines about the Federal Reserve and interest rates. And if you're a homebuyer or a real estate agent working with buyers, you might wonder: Does the Federal Reserve control mortgage rates? It’s a great question. And the short answer is: Not necessarily. The longer answer is a bit more nuanced because while the Fed does play an important role in the economy, it doesn't directly control mortgage rates. What Is the Federal Reserve and the Federal Funds Rate? The Federal Reserve—often referred to simply as the Fed—is the central bank of the United States. Its primary job is to keep the economy healthy by keeping inflation in check, supporting the labor economy, and promoting stable & sustainable economic growth. One of the main tools the Fed uses to manage the economy is the Federal Funds Rate. This is the interest rate banks charge one another for overnight loans. While consumers don’t pay this rate directly, it has a ripple effect across the economy, influencing rates on credit cards, auto loans, and savings accounts. How the Federal Funds Rate Influences the Economy When the Fed raises the Federal Funds Rate, it becomes more expensive for banks to borrow money. That tends to result in higher borrowing costs for consumers and businesses in an attempt to slow down inflation and prevent the economy from overheating. When the Fed lowers the rate, borrowing becomes cheaper. This encourages more spending and investment, often a strategy used during economic slowdowns or recessions. Important distinction: The Federal Funds Rate influences the economy, but it does not directly control mortgage rates. Why Mortgage Rates Don’t Always Follow the Fed Here’s where a lot of confusion begins. Many people assume that when the Fed raises interest rates, mortgage rates automatically rise too. But that’s not how it works. Mortgage rates are driven by a different set of economic factors, mainly the bond market. Specifically, rates are closely tied to the 10-year Treasury yield and the performance of mortgage-backed securities (MBS). Investors who buy these securities care most about the labor market, inflation, the long-term economic outlook, and market stability/instability If inflation is rising or expected to rise, mortgage rates tend to increase. If economic conditions appear weak or uncertain, rates can fall, even if the Fed is raising the Federal Funds Rate. In fact, mortgage rates often move in anticipation of what the Fed might do, not just in response to what it has done. The markets are always looking ahead. What Really Drives Mortgage Rates? Here’s a quick snapshot of the major factors that impact mortgage rates: Inflation: Higher inflation usually = higher mortgage rates. Economic Growth: A strong economy can lead to higher rates. Global Events: Uncertainty (like geopolitical conflict or pandemics) can drive rates lower. Bond Market Demand: More demand for mortgage bonds often = lower mortgage rates. In other words, mortgage rates are influenced by a wide range of factors and are always forward-looking. Want more in-depth analysis of the housing market? Check out our weekly Housing Market Update blog. How Homebuyers and Real Estate Can Navigate the Market For homebuyers and the real estate agents supporting them, the key takeaway is this: Don’t assume that a Fed rate cut means mortgage rates are going down. In some cases, mortgage rates don’t move much on the day that the Fed cuts rates. Most of the time, they will drop in the lead-up to a Fed Meeting if a rate cut is expected. Other times, they might drop after a Fed announcement, depending on how markets interpret the economic outlook. If you’re considering buying a home or are an agent for a hesitant buyer, here’s how you should navigate periods of market instability: Focus on personal goals and timing, rather than trying to time the market. Work with a knowledgeable mortgage professional who can explain how market shifts impact your unique situation. Make informed decisions based on the bigger picture, not just headlines. Whether you're buying, selling, or considering a refinance, UMortgage Loan Originators are here to help you navigate the market with confidence and leverage homeownership to build wealth. If you’re curious about your homebuying or refinance options and want expert guidance, fill out this form to get connected with a UMortgage Loan Originator in your area!

How the CFPB impacts homebuyers and how they can protect themselves from financial risks The Consumer Financial Protection Bureau (CFPB) plays a key role in protecting consumers from unfair, deceptive, or abusive financial practices, particularly in the mortgage and homebuying space. However, ongoing discussions about the CFPB’s structure and role have raised questions about what potential changes could mean for homebuyers, real estate agents, and mortgage professionals. Regardless of how the CFPB evolves over the coming months and years, understanding its impact on the mortgage industry and working with trusted professionals remains essential for ensuring a smooth and transparent home financing experience. What is the CFPB? The Consumer Financial Protection Bureau is an independent agency within the Federal Reserve System that enforces consumer protection regulations across the financial sector. Its jurisdiction includes banks, credit unions, debt collectors, mortgage servicers, and other financial institutions operating in the U.S. The CFPB was established in 2011 following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress enacted in response to the 2008 financial crisis. The agency's primary functions include: Writing and enforcing rules to prevent deceptive financial practices Examining financial institutions to ensure compliance with consumer protection laws Monitoring financial markets and trends Collecting and tracking consumer complaints By enforcing regulations, the CFPB helps create a more transparent mortgage process for homebuyers and homeowners alike. Which CFPB Regulations Impact Homeowners and Homebuyers? Following the subprime mortgage crisis, which contributed to the 2008 financial meltdown, the CFPB implemented several key regulations to improve transparency and fairness in the mortgage process. Some of the most impactful changes include: Increased Transparency on Loan Fees & Closing Costs The TILA-RESPA Integrated Disclosure (TRID) rule ensures borrowers receive clear, standardized disclosures about their loan terms and associated costs. The Loan Estimate and Closing Disclosure documents provide detailed breakdowns of fees, allowing homebuyers to make informed decisions before committing to a mortgage. Read this guide on how to interpret your Loan Estimate to better understand the costs that make up your mortgage. Protection Against Discriminatory Lending Practices The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating against borrowers based on race, gender, disability, or other non-financial factors. The CFPB enforces this law to prevent unfair lending practices such as redlining, where certain communities are denied equal access to credit. Take Legal Action Against Consumer Deception The CFPB takes legal action against lenders who engage in deceptive marketing, excessive fees, or unethical lending practices. Over the years, the agency has issued fines against multiple financial institutions for misleading advertising, unfair loan terms, and discriminatory lending. For example, in 2024, the CFPB ordered NewDay USA to pay a $2.25 million civil penalty for misleading cost comparisons that encouraged borrowers—particularly service members and veterans—to take out cash-out refinances, a practice known as loan "churning." Other enforcement actions have targeted mortgage servicers who failed to provide accurate payoff information and lenders who charged illegal junk fees. Ultimately, the CFPB's regulations aim to make the mortgage process less deceptive, more transparent, and more equitable for all eligible homebuyers. Why Homebuyers Shouldn’t Panic Over CFPB Changes Recent changes at the CFPB have fueled speculation within the mortgage industry, but for homebuyers, this is not a cause for alarm. Here’s why: The Mortgage Industry Has Matured The 2007-2008 financial crisis forced the industry to adopt stricter guidelines, licensing requirements, and consumer protections. While the CFPB has played a role in enforcing these regulations, today’s mortgage professionals operate in a fundamentally different landscape—one where transparency and ethical lending are already ingrained in industry standards. The CFPB’s Role Has Shifted Over Time While the CFPB was originally created to correct predatory lending practices, excessive red tape has made the mortgage process unnecessarily complex in some cases. Adjustments to the agency’s structure could help streamline regulations without compromising consumer protections. Why It’s Important to Work With Mortgage Professionals You Trust Regardless of what happens to the CFPB in the coming months or years, homebuyers should prioritize working with mortgage and real estate professionals who act in their best interest. The CFPB has helped enforce transparency, fairness, and ethical lending practices; this level of strict oversight and enforcement has advanced the mortgage industry and its loan originators. Even without the CFPB watching over their shoulders, these standards remain upheld. An experienced LO who values long-term client relationships will take the time to explain mortgage options, closing costs, and potential risks, just as the CFPB’s guidelines encourage. They will provide clear and honest disclosures about loan terms, ensuring that borrowers fully understand their financial commitments before signing. Ultimately, while government regulations provide a safety net, the best protection for homebuyers will always come from working with mortgage and real estate professionals who prioritize their clients’ long-term financial health. If you’re interested in starting your mortgage journey or simply want to learn more about your options, fill out this form or check out our directory to connect with a LO in your area.

Last Updated: March 25th at 2:31pm ET On March 4th, President Donald Trump announced new tariffs, imposing a 25% duty on nearly all imports from Mexico and Canada and increasing tariffs on Chinese imports to 20%. While tariffs on items protected by the United States–Mexico–Canada Agreement (USMCA) have been delayed until April, understanding their potential impact on the homebuying process could help you avoid unexpected costs when purchasing a home or helping your client buy their home. Many economists believe that these tariffs will have a noticeable impact throughout the housing economy, including housing costs and mortgage interest rates. While these changes could affect home prices and mortgage rates, understanding their impact can help you make informed homebuying decisions and ensure that you’re taking the most affordable route possible to buy a home. Why is President Donald Trump Imposing Tariffs on Canada, China, and Mexico? The Trump administration has cited several reasons for these tariffs, including boosting U.S. manufacturing, addressing trade imbalances, and increasing revenue for the U.S. Treasury. Increase U.S. Manufacturing: Trump has cited his primary reason for imposing these tariffs as bringing more business manufacturing back to the U.S. In his address to Congress, he said, “If you don’t make your product in America… you will pay a tariff, and in some cases, a rather large one.” Balance the Budget: Contrary to common belief, tariffs are paid by American companies importing goods, not by foreign governments. These payments go to the Federal Reserve and would help reduce the national deficit. Prevent Flow of Illicit Drugs into the U.S.: Trump has referenced the illicit flow of fentanyl into America as a reason for tariffs on its North American neighbors and China. How Tariffs Will Impact Home Prices & Construction Costs Home builders heavily rely on imported goods like building materials and appliances to minimize building costs. Here’s how these tariffs will impact homebuilders and subsequently homebuyers looking to build a home. Homebuilders Rely on Imported Goods A recent report by John Burns Real Estate Consulting (JBREC) showed that homebuilders import 31% of sawmill wood products, with 73% of those imported products coming from Canada. Builders also import 73% of small appliances for new homes, with 67% of those imports coming from China. The 25% tariff on goods imported from Canada & Mexico and 20% tariff on goods from China will directly impact the cost of timber, steel, aluminum, small & large household appliances, and building hardware. Trump’s Plan to Offset These Costs To help offset rising costs, the administration has taken steps to increase domestic timber production, including an executive order aimed at expanding logging operations. On Saturday, March 1st, Trump signed an executive order focused on the immediate expansion of American timber production. It directly cited increased forest management, wildfire risk reduction, and reduced regulations that might slow down timber production. As of March 6th, there have been no additional announcements regarding domestic production of other building materials. Will Tariffs Affect Mortgage Interest Rates? The implementation of tariffs on imported goods will have greater economic impacts than the cost to build a home. This can be seen directly through volatility in the stock market as Trump proposes and delays tariffs against China, Canada, and Mexico. Slower Economy Leads to Lower Mortgage Rates Tariffs can create uncertainty in the stock market. When stocks become volatile, investors often shift money into U.S. Treasury bonds, causing bond yields to drop. Since mortgage rates tend to follow the 10-year Treasury yield, this could lead to lower borrowing costs. Risk of Increased Inflation While tariffs might help lower mortgage rates by slowing consumer spending, they can also contribute to inflation by increasing the cost of goods. The Federal Reserve closely monitors inflation trends when setting interest rate policies. During a Q&A session at an economic forum on March 7th, Jerome Powell, Federal Reserve Chair, said, "In a simple case where we know it's a one-time (price hike), the textbook would say look through it," when asked if tariffs would have inflationary effects. "Uncertainty around the changes and their likely effects remains high," continued Powell. "As we parse the incoming information, we are focused on separating the signal from the noise. As the outlook evolves, we do not need to be in a hurry, and we are well positioned to wait for great clarity." How Homebuyers Should React to Tariffs While tariffs will have an impact on the cost to buy a new home, there are plenty of things that homebuyers can do to protect themselves from inflation and grow their financial portfolio. Buy When You’re Ready Rather than trying to time mortgage rate changes, it's often best to buy when you're financially prepared. Mortgage rates are volatile; they can gradually increase and decrease every day. Home prices fluctuate too, but when you look at the average price of houses sold in the U.S. over the last decade and beyond, the lines largely just go up. Graph displaying average sales price of new homes, average sales price of all homes sold, and median sales price of all homes sold in the U.S. dating back to 1960. Historically, real estate is one of the safest investments you could make. Beyond the price of your home appreciating over time, you’ll also have stable monthly mortgage payments, receive several tax benefits that will help lower your tax bill, and earn equity with every mortgage payment that can be leveraged in the future. Consider Existing Homes on the Market Instead of New Builds As building costs increase, it might make more sense to consider homes that have already been built and lived in. In many cases, they’re more affordable than new builds and offer more negotiation power when it comes to price, closing costs, and repairs. Considering things like construction delays and building codes, you can typically move into an existing home sooner—typically within 30-60 days after closing. And of course, we have to mention the unique charm that comes with older homes. Touches of craftsmanship like crown molding, hardwood floors, and intricate stone & ironwork add plenty of personality to a home that’s much more expensive to replicate in a new build. Work With Mortgage & Real Estate Professionals You Trust As always, the best way to protect and grow your financial health through homeownership is to work with mortgage & real estate professionals you trust. A UMortgage Loan Originator will walk you through all your loan options, shop rates with you, and, after you’ve closed on your mortgage, help you continue to leverage the wealth-building benefits of homeownership. If you’re ready to start exploring your pathway to homeownership or are curious how you can leverage the equity you’ve built through the home you own, fill out this form to find a UMortgage Loan Originator near you!