Rates! Let’s address the 800-pound gorilla in the room. Mortgage rate predictions for 2024 missed the mark, and 2025 isn’t looking much better. The general consensus going into 2024 was for rates to drop into the low 5% range by December, yet we ended the year hovering around 7% for a conventional 30-year fixed mortgage.
For 2025, predictions are just as scattered. The National Association of Realtors optimistically projects rates as low as 5.75% (they’re dreamers), while Redfin forecasts rates as high as 7.50% (not sure why they get a say). There are 11 government agencies and industry experts issuing high and low-interest rate projections. Some provide monthly or quarterly estimates, while others stick to annual ranges. If we average their predictions, we land at 6.36%—a full 1.125% higher than what they anticipated just six months ago.
It’s possible to build a compelling case for rates dropping to 5.50% by the end of 2025, especially with political shifts, global instability, and market uncertainty as factors. However, an equally strong case can be made for rates climbing to 8%. Yes, 8%.
What’s clear is 2025 will bring the same volatility we’ve seen over the last three years. Rapid rate changes, unpredictable markets, and new leadership in Washington, D.C., will present challenges for mortgage lending.
Rising Closing Costs in 2025
Expect significant increases in closing costs this year. Mortgage credit reports alone are projected to rise by 25% or more, costing between $115 and $200. Appraisal fees are expected to increase again, along with other third-party verification services like employment verifications, flood certifications, and miscellaneous processing fees.
On average, closing costs in 2025 could rise by $500 to $1,000. If you also need to cover your buyer agent’s commission (should sellers refuse to), this could add up to 3% of the sales price—potentially thousands of dollars. These rising costs will make it even harder for first-time homebuyers, whose primary hurdle remains cash for down payments and closing expenses.
Legal Challenges in the Mortgage Industry
The mortgage industry faced numerous legal challenges in 2024, ranging from redlining allegations against Wells Fargo to issues like zombie second mortgages, home title theft, and wire fraud. Most recently, Ocwen Mortgage and Mr. Cooper came under scrutiny for charging transaction fees just to make a mortgage payment.
Closer to home in Arizona, Rocket Mortgage and the Jason Mitchell real estate team faced accusations from the CFPB for alleged kickbacks. These legal battles often lead to increased regulation, higher fees, and stricter underwriting guidelines—all of which trickle down to the consumer.
The Problem of Trigger Leads
Trigger leads—when credit bureaus sell borrowers’ information seconds after their mortgage credit report is pulled—have been a longstanding issue in the mortgage industry. Since rates began rising in 2022, this practice has become increasingly problematic.
Many companies purchasing these leads fail to comply with regulations under the CFPB, RESPA, TRID, or FCRA, often bypassing requirements to make a formal offer of credit. This confuses consumers, as these companies can impersonate legitimate loan officers and lure borrowers into higher rates and fees.
While Congress attempted to pass legislation in 2024 to limit the sale of trigger leads, it failed twice. Borrowers can protect themselves by visiting OptOutPreScreen.com to prevent their credit data from being sold.
Mortgage Fraud on the Rise
Mortgage fraud increased by 8.3% in 2024, affecting 1 in every 123 mortgage closings. As rates rise and qualifying for homes becomes more challenging, fraud has become more common among realtors, loan officers, and other third parties in the industry.
- Lender Fraud: Some lenders convince homeowners to refinance with little to no benefit, solely to earn commissions.
- Appraiser Fraud: Unlicensed staff often complete appraisals, which are then signed off by licensed appraisers. This trend is increasing as appraisers aim to process more transactions with less staff.
- Consumer Fraud: Fake jobs, pay stubs, and W-2s remain top offenses, followed by occupancy and down payment fraud.
It’s worth noting consumer misrepresentation isn’t always done by the consumer. Mortgage loan officers often complete applications on behalf of borrowers, omitting details that could disqualify them. Some loan officers even underreport real estate owned by borrowers, hoping underwriters won’t uncover it.
In some cases, mortgage loan officers classify properties as vacation homes—requiring lower down payments and interest rates—even when borrowers plan to use them as rentals. This type of fraud drives up industry costs, resulting in higher rates, stricter guidelines, and increased expenses for consumers.
The Bottom Line for 2025
Despite the challenges, 2025 remains a great time to buy a home—but be prepared for a more expensive and complex process compared to 2024. Rising costs, regulatory hurdles, and market volatility will test buyers, but with the right preparation, homeownership is still attainable.
