Consumers slowly becoming accustomed to higher-for-longer rates?
During the pandemic, mortgage rates plunged and scores of homeowners and buyers rushed to take advantage of ultra-low borrowing costs, triggering a purchasing and refinancing surge.
Borrowers got used to those rock-bottom rates between 2020 and 2022, meaning the subsequent spike in rates – triggered in part by a spiraling inflation crisis – saw the rise of the so-called “lock-in” effect, with homeowners unwilling to list their properties or move and sacrifice a rate they wouldn’t get again.
The Federal Reserve will now cut interest rates three times in 2025 with chances of a US recession rising to 35%, according to Goldman Sachs.https://t.co/XCTuoZrx7n
— Mortgage Professional America Magazine (@MPAMagazineUS) March 31, 2025
But borrowers have slowly become accustomed to the new reality, Haddad said, meaning they’re no longer put off by rates significantly higher than those seen during the pandemic.
“What’s happened over the last three years is that [brokers] have taught the consumer that the average rate is 6.99% or 7.5%,” he said. “The first year or two years [after COVID] it was, ‘We want the 2%, we want the 3%.’ So once we see that bottleneck start to pop, I think [activity] is going to absolutely skyrocket.”
How are homebuyers responding to potential economic volatility?
A potential spanner in the works could be the Trump administration’s looming trade war, with today marking so-called “Liberation Day” for the US – the imposition of sweeping tariffs against countries including European Union nations, Canada, and Mexico.