At A Glance

• Mortgage rates gradually eased throughout 2025, falling from a January peak above 7% to 6.18% as of December 11.
• The Federal Reserve cut its benchmark rate three times this fall, lowering the Fed Funds Rate from 4.25% to 3.50%.
• Home prices rose about 2% year-over-year, while inventory grew nearly 13%, improving supply but leaving affordability tight.
• HUD has announced new FHA loan limits for 2026, raising the floor to $541,287 for most areas of the country, effective January 1.

As 2025 comes to a close, the mortgage and housing markets reflect a year of transition. The first half of the year saw a continuation of elevated rates and affordability challenges, while the second half delivered gradual relief for borrowers as economic conditions shifted.

Rates See Gradual Descent in 2025

Mortgage rates began the year on an upward trend that carried over from late 2024, peaking just above 7% in mid-January.¹ Persistent inflation concerns and a cautious Federal Reserve stance kept short-term rates elevated early on.

By late February, rates stabilized in the mid-to-upper 6% range before briefly rising again in spring amid tariff-related uncertainty.² From summer onward, rates trended downward, supported by expectations—and eventual delivery—of Fed rate cuts.³

Since then, mortgage rates have been on a gradual trend downward, with a notable drop during the summer months.⁴ This movement was partly influenced by expectations of Federal Reserve action, as three rate cuts were anticipated and later delivered in the fall.

“For buyers and sellers, the story isn’t a sudden pivot, but a gradual normalization,” said Brett Hively, SVP and Mortgage Capital Markets Strategist at Ameris Bank. “When rates are significantly lower than where they began the year, households can re run the math and see more paths to a purchase or a refinance.”

Over the last few months, rates have stabilized, and as of mid-December, the average rate for 30-year conforming mortgage rate was 6.219%.⁵

“Rates are fairly steady now, and some scenarios could even seeing a 5-handle in the near term,” said Hively. “This has brought some relief for borrowers and may spark renewed interest in refinancing.”

Policy Helped Set the Tone

The Fed cut its benchmark rate three times (September, October, and December), citing softer labor conditions and elevated, but cooling, inflation. The December move brought the target range to 3.50%–3.75% and capped a 75 basis point easing cycle in 2025.⁶

“Rate cuts don’t directly set mortgage pricing, but they anchor expectations.” Hively said. “When markets think policy is nearer neutral, rate volatility calms and that predictability is valuable for both lock decisions and listing strategy.”

Housing Supply Increased as a Whole

Inventory improved meaningfully in 2025, though it remains below pre-pandemic norms. Active listings in November were up 12.6% year-over-year, marking the 25th straight month of annual gains.⁷

While supply improved, affordability remains tight as homes spend longer on market and price reductions grow more common. For buyers, this means more options and negotiating leverage, especially in markets with higher insurance costs or abundant new builds. For sellers, it underscores the need for realistic pricing and concession strategies to keep deals moving.

Prices Showed Modest Growth. 

According to the Federal Housing Finance Agency (FHFA), U.S. house prices rose 2.2% year-over-year and 0.2% quarter-over-quarter in Q3 2025.⁸ This reflects a continued slowdown from prior years, with appreciation largely concentrated in select affordable metros and more muted trends in higher-cost regions.

“A 2.2% annual gain is a far cry from the double-digit spikes we saw during the pandemic,” Hively said. “For buyers, that’s encouraging. It means the market is moving toward sustainable pricing, even if affordability is still tight.”

FHA Loan Limits Increased for 2026

The U.S. Department of Housing and Urban Development (HUD) announced new county-by-county FHA loan limits for 2026 last week.⁹ The new floor is $541,287 for most areas, and the ceiling is $1,149,825 in high-cost markets, effective January 1. These changes expand borrowing power for FHA buyers heading into the new year.

“Higher limits mean more flexibility for first-time buyers,” Hively said. “For buyers close to the cap in 2025, it’s worth checking your county’s new limit, as this could open doors that weren’t available before.”


Sources:
^{1, 2, 3, 4, 5} https://www2.optimalblue.com/obmmi
⁶ https://www.federalreserve.gov/newsevents/pressreleases/monetary20251210a.htm
⁷ https://www.realtor.com/research/november-2025-data/
⁸ https://www.fhfa.gov/news/news-release/u.s.-house-prices-rise-2.2-percent-year-over-year-up-0.2-percent-quarter-over-quarter
⁹ https://www.hud.gov/news/hud-no-25-145


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Ameris Bank does not endorse nor is affiliated with the companies listed in this article.