Mortgage limits increase as home prices soar in the U.S

In the United States, the Federal Housing Finance Agency (FHFA) announced an increase in conforming loan limits for mortgages backed by Freddie Mac and Fannie Mae. Starting in 2025, the new limit for a single-unit home will be set at $806,500, reflecting a 5.2% increase from the previous year’s limit. In high-cost areas, where the local median home price exceeds 115% of the baseline limit, the cap will rise to $1,209,750, which is 150% of the new conforming loan limit. This adjustment comes as home prices have surged, marking a significant change in the housing market landscape, which has continued to struggle with affordability issues. The FHFA's decision is based on an analysis of average home price trends, which have shown a steady climb of 5.21% over the most recent year. This has coincided with rising mortgage rates, creating a challenging environment for prospective homebuyers in the U.S. Freddie Mac's Primary Mortgage Market Survey noted that the average 30-year fixed mortgage rate crept up to 6.84%, demonstrating a slight increase from previous weeks. A year prior, rates were even higher at 7.29%. This context highlights the broader ramifications affecting housing affordability, as rising home prices together with elevated mortgage rates have made securing a home a significant financial hurdle for many Americans. Reports from academic economists noted that a typical mortgage payment, when adjusted for inflation, is now 82% higher than levels seen before the pandemic. Consequently, this situation has led to a marked decline in existing home sales, which have reached their lowest rates since 2010, intensifying the ongoing crisis in the housing market that many are currently facing.