Market

Feeling the Mortgage Rate Squeeze? Here’s How to Turn It to Your Advantage

January 30, 2025

If you’ve been keeping an eye on the housing market here in Shawnee and central Oklahoma, you might have heard that the Federal Reserve recently cut interest rates. Conventional wisdom might tell you that would lead to lower mortgage rates, right? Well, not so fast. Instead of dropping, mortgage rates have been climbing, leaving many wondering what’s going on.

Let’s break it down so you can see how these changes might impact your next big move.

Fed Rate Cuts: What’s Happening?

In December 2024, the Federal Reserve lowered the federal funds rate by 0.25% in an effort to stimulate the economy. Lowering this rate makes it cheaper for banks to borrow money, which can trickle down to things like credit card rates or personal loans.

But mortgage rates aren’t directly tied to the Fed’s rate cuts. Instead, they’re influenced by longer-term trends in the bond market and broader economic factors.

Why Aren’t Mortgage Rates Falling in 2025?

If you’ve been watching the headlines, you know the Federal Reserve cut interest rates recently. That should mean lower mortgage rates, right? Not so fast. Mortgage rates march to the beat of their own drum, and right now, they’re staying high thanks to a few big factors.

  1. Inflation’s Still a Problem
    Inflation is like that house guest who overstays their welcome—annoying and hard to get rid of. Investors get nervous about inflation eating into their profits, so they push up long-term interest rates, including mortgages. What’s making it worse? Policies like 25% tariffs on imports from Canada and Mexico that President Trump is rolling out. Higher costs on goods lead to higher prices across the board, keeping inflation alive and kicking. And that means higher mortgage rates, too.
  2. A Strong (but Complicated) Economy
    A strong economy sounds like a win, but it comes with its own set of challenges. Low unemployment and steady job growth put upward pressure on prices, and that trickles down to borrowing costs. On top of that, with tighter immigration policies and trade tariffs, industries like construction are feeling the pinch from labor and material shortages. Less supply, more demand—it’s not hard to see how this impacts housing costs.
  3. The Bond Market Factor
    Here’s where it gets a little nerdy but important. Mortgage rates tend to follow the 10-year Treasury yield, which reflects investor confidence. Right now, those yields are climbing thanks to inflation concerns and a hefty dose of government borrowing. So, even if the Fed lowers short-term rates, it doesn’t always translate to cheaper mortgages.

Bottom line? Mortgage rates aren’t coming down just because the Fed says so. The big picture—policies, inflation, and economic trends—has a much louder voice. But don’t let that discourage you. Buying a home in Shawnee or central Oklahoma is still possible, and I’ve got plenty of tricks up my sleeve to help you navigate these challenges. Stick around for the tips below!

What Does This Mean for Shawnee Homebuyers?

If you’re thinking about buying a home in Shawnee or the surrounding areas, it’s important to know that while rates are higher than we’ve seen in recent years, they’re still manageable compared to historical averages. The 6.93% average rate for a 30-year fixed mortgage is a far cry from the double-digit rates of the 1980s, but it’s certainly a shift from the low 3% range many buyers enjoyed during the pandemic years. I’d be gobsmacked if we see either of those again.

Tips for Navigating Today’s Market

Here’s how to make the most of the current market in Shawnee and central Oklahoma:

  1. Get Pre-Approved Early: Work with a trusted local lender to lock in the best rate you can find. Pre-approval also gives you a clear budget as you shop. And it shows sellers you’re a strong buyer. Then it’s up to them for their house to qualify!
  2. Consider an Adjustable-Rate Mortgage (ARM): If you’re planning to move again in a few years, an ARM could help you secure a lower rate initially.
  3. Think Long-Term: Real estate in Shawnee is still an excellent investment. While rates may fluctuate, home values tend to increase over time, especially in growing areas like ours.
  4. Partner with the Right Agent: A knowledgeable local agent can help you navigate the nuances of our unique market and negotiate effectively to keep costs down.

A Look Ahead: What’s Next for Mortgage Rates?

Economists predict that mortgage rates may ease slightly in 2025, but don’t expect a return to the record lows we saw in 2020 and 2021. Current forecasts suggest rates will hover above 6% for much of the year. However, if inflation shows signs of cooling or economic conditions change, rates could shift.

Why Shawnee and Central Oklahoma Are Still Great Places to Buy

Despite higher rates, Shawnee and central Oklahoma remain incredibly appealing for homebuyers. Our community offers a blend of affordability, strong schools, and a welcoming atmosphere that’s hard to beat. Plus, with the expansion of local businesses and proximity to Oklahoma City, the area is poised for continued growth.

If you’re thinking of making a move or have questions about what this market means for you, reach out. Whether it’s breaking down your financing options, finding a home that fits your needs, or negotiating in today’s environment, I’m here to help. Let’s make 2025 your year to love where you live!

Final Thoughts

While the housing market may feel unpredictable, having the right knowledge and the right team in your corner makes all the difference. If you’re ready to explore your options in Shawnee or central Oklahoma, let’s chat. You don’t have to navigate these trends alone.

Want more tips or advice? Sign up for my newsletter, Steve’s Shawnee Scoop, for local insights, real estate updates, and more. Let’s tackle this market together!