Higher interest rates add to problems with affordability that have hammered the housing market for the last two years. Prices have continued to climb despite slower sales volume, posting 17

Some U.S. consumers are optimistic about the housing market in 2025, believing there's a chance mortgage rates and home prices drop. But how likely is that to really happen?

Mortgage rates topped 7% this week, a key psychological threshold, in a sign of the US housing market’s unrelenting affordability challenges.

"While I'd love to say rates will drop below 6% in 2025, I think it's a moderate probability and not a certainty," says Steven Parangi, a licensed mortgage loan originator and owner of Alpine Mortgage Services. His view aligns with the Mortgage Bankers Association's prediction that rates will stay between 6% and 7% throughout the year.

MSCI's global equities gauge rose on Thursday, while Wall Street indexes closed lower and U.S. Treasury yields fell after a mixed bag of economic data and Federal Reserve official comments suggesting more interest rate cuts on the horizon.

US mortgage rates topped 7% last week, reaching the highest level since early May and extending a months-long advance that risks restraining the housing market.

The Fed is tapping the brakes on interest rate cuts because inflation remains stubbornly high. That's pushed mortgage rates higher.

After climbing to their most expensive level in more than seven months, 30-year mortgage rates held steady Tuesday. Rate movement was mixed for other loan types.