Will Affordability Improve — Or Will Rates Drop First?

September 24, 2025•4 min read

Will Affordability Improve — Or Will Rates Drop First?

Mortgage seekers often ask: Which comes first — better affordability, or lower interest rates? In other words, is relief coming more from rate cuts, or from income growth, softer home prices, or other structural shifts?

As a mortgage loan officer, you can use this as both educational content and lead-generation content: many prospective borrowers are watching every twist in rates, waiting to “time the market.” Your blog can help them understand what’s realistic, what to watch, and when it might make sense to act (rather than wait).

Here’s a possible outline + content you can flesh out and localize (for your city/region).

Introduction: The perpetual question

Buying a home is one of the biggest financial commitments many people will make.
Right now, rising interest rates and stretched home prices have squeezed affordability across many markets.
Borrowers want to know: Will things get easier soon?
As a mortgage professional, you’re in a good position to explain what’s driving rates and affordability—and help clients make smart decisions.

What recent forecasts & data suggest

Here’s a look at what many analysts and institutions are projecting — and what constraints they’re pointing out.

Rate forecasts

Fannie Mae’s Fall 2025 forecast sees 30-year mortgage rates ending 2025 around 6.4 %, and easing further to 5.9 % by end-2026.
Other forecasters are more cautious. Some expect rates to hover in the 6–6.5 % range for the next couple of years.
Wells Fargo has expressed skepticism that rates will drop dramatically in the short term, citing persistent inflation pressures.

Affordability challenges & limits on relief

Zillow warns that in many markets, rates would need to fall to ~4.43 % to restore “typical affordability”—a drop many consider unrealistic.
In their analysis, Bankrate emphasizes that small declines in home price don’t move the needle nearly as much as shifts in interest rate do.
U.S. Bank notes that while price growth has slowed and supply is rising, affordability remains under stress until rates move or incomes at the lower end gain ground.

Inventory and “lock-in” effects

One wrinkle: many homeowners locked into very low rates (pre-2022) are reluctant to move or sell, limiting supply. This “lock-in” effect dampens inventory growth.
If and when rates fall, more supply may come to market (as some owners move or refinance), which could help soften price strength in some markets.

A plausible scenario: modest relief, slowly

Putting all the pieces together, here’s a plausible scenario you might present to your audience — with caveats:

Short term (next 6–12 months): Rates likely remain volatile. Inflation data, central bank caution, or global uncertainties can derail optimistic projections. A major drop is unlikely.
Medium to long term (12–24 months): Gradual easing is more likely than steep drops. As inflation softens, central banks may cut policy rates, which, combined with falling long-term yields, could push mortgage rates modestly lower (perhaps toward the 5.5–6 % zone, depending on the market).
Affordability gains will be gradual: Because of price pressures, supply constraints, and residual demand, big jumps in affordability are unlikely unless rates ease significantly and incomes rise or prices stabilize/soften.
Markets will diverge: Some metro areas, especially where prices stretched far, may see price corrections or slower growth, offering local affordability relief. Others (fast-growing, tight inventory areas) may remain more resilient.

In short: we’re more likely to see improvement rather than dramatic rate cuts. And that improvement will likely be incremental.

What this means for potential buyers (and your clients)

As a mortgage professional, you can use this narrative to guide and reassure buyers. Here are some key takeaways and strategic suggestions to share:

Don’t wait indefinitely for a perfect moment. Because rate improvements are likely to be gradual, waiting for “the bottom” may cost buyers in lost equity or higher rents.
Lock in when conditions are favorable. If a client qualifies now and rates drop slightly further, refinancing remain an option.
Watch local market trends. National forecasts are useful, but local dynamics (inventory, price momentum, demand) often matter more.
Stress income growth and down payment strength. Clients with stronger incomes, lower debt ratios, and good down payments will weather fluctuations better.
Be ready to act. When signs point toward a sustained rate move (e.g. multiple inflation reports below target, policy cuts), your clients should be ready to lock.
Educate about options. Adjustable-rate mortgages, rate buydowns, or creative financing programs (if available in your area) can help mitigate short-term rate pain.

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