"Shark Tank" investor Kevin O'Leary says U.S. mortgage rates are unlikely to fall back below 5% anytime soon, arguing that America's strong economy and AI-fueled productivity growth mean the era of ultra-low borrowing costs is over.
O'Leary Says Past Lower Rates Were An ‘Aberration'
In a video posted on social media over the weekend, O'Leary dismissed hopes of a return to historically low mortgage rates.
"No, I don't think so," he said, referring to the mortgage rate dipping below 5% again."I think it’s going to take a very, very, very long time for that to happen if ever. I think the days of free money are over."
The investor, worth $400 million according to Celebrity Net Worth, pointed to record-high stock indexes, fueled by advances in artificial intelligence, as evidence of a more productive economic phase.
"The economy is stronger than people think. The tariff issues will be gone by the end of the year and then we settle into a 10 to 15% range," he said, adding that 7% mortgage rates are not uncommon historically.
Advice For Homebuyers: Buy Smaller, Spend Smarter
O'Leary urged homebuyers to adjust expectations rather than overextend financially.
"All that it means, though, is you’re going to buy a house 30% smaller. That’s all," he said, warning against spending more than one-third of after-tax cash flow on a mortgage.
"Many people break that rule to their detriment. That really nice home eats them alive because there's a cost of maintaining a home you have to deal with."
He called past mortgage rates near 3% an anomaly, saying those who secured them were "very fortunate."
"That aberration of three-and-a-half percent mortgages… was just a drop in the bucket. That's over."
Mortgage Rates Dip Slightly But Remain High
According to Freddie Mac's FMCC latest Primary Mortgage Market Survey, the average 30-year fixed-rate mortgage fell to 6.58%, the lowest level since October 2024. The 15-year fixed rate also declined to 5.69%.
Analysts say the drop offers some relief to buyers but is unlikely to reignite a frenzy in housing demand.
Market Sentiment And Fed Outlook
Investors anticipate a potential Federal Reserve rate cut as early as September, but analysts warn that significant reductions could fuel home price inflation.
The TurboHome-ResiClub Housing Sentiment Survey from July shows growing acceptance of mortgage rates of about 6%, reflecting a market adjusting to prolonged higher borrowing costs.
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