When the Fed began cutting the federal funds rate again in September 2024 after years of rate hikes, economists expected mortgage rates to fall in tandem. However, economic uncertainty, sticky inflation, and volatile financial markets have kept rates elevated.
High mortgage rates and rising home prices have dampened homebuyer demand and housing sales, stifling any hopes of a housing market rebound this year. While there may be some modest improvements, homebuyers may not see significant changes until 2026.
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The Fed recently announced it would not be cutting interest rates in July, and will continue to monitor key economic indicators ahead of its September meeting. While many are hopeful an interest rate cut could be on the horizon, boosting consumer confidence, others are less optimistic.
In an Op-Ed for the Daily Mail, investor and “Shark Tank” alum Kevin O’Leary shares his predictions for the Fed’s policy and for mortgage rates, explaining why recovery for the housing market may not be in the cards this year.
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Kevin O’Leary expects more trouble on the horizon for inflation and mortgage rates
After years of targeted inflation suppression from the Fed, the CPI inched toward 2% in 2024. However economic uncertainty, political tensions, and a renewed global trade war have pushed inflation rates back toward 3%.
June and July CPI data demonstrate inflation rates of 2.7%, a sustained level that was higher than anticipated. Consumer prices are just now starting to show the full impact of the Trump administration’s blanket tariffs, supporting the Fed’s “wait and see” approach to monitoring inflation.
In an Op-Ed for the Daily Mail, O’Leary references July’s CPI data release, noting that inflation rose faster than anticipated. To him, it reads as a warning for what’s to come.
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“In fact, I’m betting there won’t be a rate cut at all in 2025. And that will keep the U.S. housing market in its current state of stagnation,” he wrote.
While the federal funds rate doesn’t directly shape mortgage rates, rate cuts often boost investor sentiment and consumer confidence, which typically translates to increased housing activity. However, O’Leary believes lower mortgage rates may not be an option any time soon.
“Here’s the cold hard truth — the days of free money and low mortgage rates are over!”
Kevin O’Leary predicts a sluggish housing market for the rest of 2025
Mortgage rates dipped to 6.58% last week, reaching their lowest level since the end of 2024. While this shows modest improvements, it’s not a strong enough signal of a market upturn.
Without a significant breakthrough in mortgage rates or an unlikely housing price correction, homebuyers will continue to wait on the sidelines of an unaffordable market.
“Right now, the average rate on the 30-year fixed mortgage is 6.58 percent, which makes it difficult for many existing homeowners, who locked in previously low rates (as low as 3 to 4 percent), to sell their homes and take on a new, higher mortgage,” O’Leary continued.
Homeownership has become completely unattainable to many first-time buyers. It may take a combination of improvements in the economic outlook, consumer confidence, home prices, and mortgage rates to create an accessible housing market for younger buyers.
“As a result, they’re demanding high sales prices — and buyers are feeling hopeless, facing exorbitant listings and high-interest mortgages.”
Related: Bank of America warns mortgage rate changes could have major housing market impact
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