Navigating 2025: A Look at What’s Ahead for the Mortgage Industry

In 2024, a number of factors significantly impacted the housing market – the economy, technology innovations and adoption, lead generation practices and policies, mortgage loan processing advances, and heated competition. In this blog, we’ll review each of them, dive deeper into just how those impacts were felt by lenders and consumers alike, and look forward to 2025 and what it may bring based on the ongoing themes that are affecting the industry.

But first, let’s review the market dynamics that are posing a continued challenge in the market – beginning with the stark realization that the higher rate cycle will remain for a longer period of time than most economists and industry insiders anticipated. And that, in turn, is impacting all the business decisions regarding if/where/how mortgage companies will invest in technology and the general expectations for the new year.

The MBA anticipates mortgage origination volume to be $2.1 trillion in 2025. It also expects mortgage rates to range between 6.4% and 6.6% in 2025. Fannie Mae expects rates to average around 6.3% in 2025 and above 6% in 2026.

Given those predictions, let’s look at the emerging issues that will shape the coming year, and how a comprehensive, relation-based platform like Mortgage365 can help you capitalize on all the opportunities that present themselves.

1. The Effects of Artificial Intelligence (AI) and Machine Learning (ML) – Most of the anticipated effects of AI and ML center around improving potential underwriting capabilities. There is much discussion about how these technologies will help lenders improve their processes and make more accurate decisions around loans.
2. Block Chain – The industry is starting to explore the concept of transparent transactions facilitated by blockchain which could cause a shift toward more openness and traceability in terms of how mortgage transactions are managed. There has also been discussion about Smart Contracts and how they could automate and enforce agreements without intermediaries. For mortgages, this could mean creating more efficient, self-executing agreements. In addition, there’s a trend toward treating mortgage instruments more as individual assets rather than parts of larger pooled securities, especially in the secondary market. This could signify a move away from the traditional mortgage-backed securities model. These blockchain innovations represent cutting-edge changes that could redefine how the mortgage industry operates over the next three to five years.
3. The Incoming Trump Administration – The new administration is expected to bring with it increased decentralization, especially around mortgage securities and how more rate competition can be created within the market.
4. Shaping the Customer Experience – There will be a continued focus on what the consumer experience should look like when obtaining a mortgage – and we’ve seen some push and pull in this area already. When rates were low, it was all about self-service – how a borrower could move from point A to point Z on their own via a purely digital mortgage. However, in this market, smart lenders are acknowledging that their loan officers provide significant value in getting borrowers through the loan journey. They consider it a high-touch experience that includes both the touchpoints where technology is absolutely needed to succeed, and where human intervention is critical to retaining a customer. The fact is, technology is being overused in some areas and it is causing lenders to lose access to borrowers that they should otherwise be serving.
5. Cybersecurity – There have been several big-name breaches in 2024 which have forced the industry to be even more diligent in its ongoing quest to keep data secure, and to figure out how to accomplish that.
6. Growing Momentum in the New Home/Builder Space – The biggest impact on home prices will directly come from the number of homes builders will complete in the next three-to-five years. There remains a significant gap between how many homes are needed versus how many are available. This issue continues to exasperate price points in every U.S. market. Throughout most of the country, we are not seeing much improvement in home prices which one would typically expect with higher rates.

Another Overarching Theme: The Return to Profitability

In general, many of lenders that were struggling this past year consolidated and most of the aftereffects of these mergers and acquisitions have been fleshed out. We are beginning to see many businesses return to profitability. And while 2025 is expected to be a growth year, just how big a growth year is unknown. There is widespread acknowledgement across the industry that, at this point, the bottom has been reached and the only way to go from this point is up.

Given this cautious optimism, there is a good amount of carefully considered purchasing going on, and lenders are definitely realizing they must invest in the systems, technology and people they need to be successful next year. That alone feels like a significant shift in the market. Nevertheless, a lot of tentativeness remains.

Technology to Incorporate in 2025

As an industry, we’ve finally gotten to the point where there is a demonstrated movement towards proactivity. Having all available data in one place, at the lender’s fingertips – as well as the fingertips of all the people they work with in both the lead and post-close pipelines – is now widely regarded as the best way to succeed in the market next year. Accessible and useful data allows lenders to uncover what’s possible in 2025.

Therefore, the best tech investment for the coming year is in a singular platform that manages all leads and loan data, and to have it work in concert with a collaboration tool that enables communication between all stakeholders, including borrowers – and on their terms – be it by phone, email, or text.

Lenders and banks are also investing more in integrations – and that trend is expected to continue throughout the coming year as well. Increasingly, lending companies are asking what integrations they can put in place that will work with everything they already have embedded in their operation, and how to streamline the entire process. As a result, there will be increasing opportunities to buy products that already have those kinds of integrations built into them.

How to Maximize the Value of Customer Relationships with Today’s Technologies

The best way to capitalize on the technologies that exist today and enhance customer relationships is to make full use of collaboration tools – and meet borrowers where they are in terms of how they would prefer to communicate. After all, no two borrowers are alike, and some are more comfortable with technology than others.

Another way to enhance borrower relationships is by uncovering all the things lenders don’t typically know about their customers. Identify their needs and goals – the type of data they typically don’t share through a loan application.

The fact is the borrower pool decreases as rates and home prices go up. Therefore, it’s now more important than ever that lenders utilize a conversational interface to uncover everything they can about their borrowers so they can determine how to best solve their customers’ problems – before their competitors can.

2025 will certainly introduce new challenges as we continue to wrestle with stubborn rates and low inventory, but there is finally light at the end of the tunnel and opportunities to be seized as long as lenders are diligent about making changes that position them for success during the next year. Investing in the people, systems, and technology that will nurture customer relationships, improve collaboration, and facilitate a more efficient and effective process is key to uncovering these opportunities and capitalizing on them in the months and years to come.