2025 Lending Outlook

During times of economic uncertainty, it’s natural to be cautious — especially if you’re considering a mortgage or personal loan. Many of today’s borrowers have questions about the current economy, the potential fluctuating interest rates and how these factors may impact their personal bottom line.

Amidst this volatility, Rocco Diina, Northwest Bank Head of Mortgage Sales, says it’s more important than ever for borrowers to understand what they need to secure a loan and how they can help improve their chances of lending success.

“You can’t control what the Fed or market does,” Diina says. “But you can take action to ensure you’re prepared for the loan process.”

Diina and John Guidone, Northwest Bank Executive Director and Head of Consumer Lending, paired up to address questions about mortgages and personal loans and provide guidance on how to navigate your debt needs in an uncertain economic environment.

Interest rates and mortgages

There’s potential that new tariffs may bolster inflation, which could encourage the Fed to reduce interest rates, but nothing is guaranteed. Diina expects mortgage rates to remain mostly flat, with slight decreases possible toward the end of the year. That could help bring new buyers into the market.

But he cautions against trying to time a home purchase with an interest rate reduction. People often sell and buy houses based on their family or job circumstances, which have their own timeline. What’s more, interest rate reductions can yield more competition among home buyers, which can impact prices.

“The best approach is to buy a home when it fits with what’s happening in your life,” he says. “There’s no benefit in trying to wait for the perfect time,” Diina says. He adds that mortgage borrowers aren’t anchored to one interest rate over the life of their mortgage. If and when interest rates drop, you can refinance into a loan that takes advantage of the lower rate.

The power of pre-approval

While timing the mortgage market is challenging, homebuyers can take some critical steps to ensure they’re ready when they find the perfect place. “Getting pre-approved is a crucial step in understanding the expense involved in home buying, and it is never too early to start that process,” Diina says.

As noted, the residential real estate market can become more competitive if rates do drop and buyer demand picks up. “Pre-approval is a must to stand out to sellers in a multiple-offer situation,” Diina says. In addition, the pre-approval process can help uncover things that could save homebuyers money down the road.

For example, you may be able to improve your credit score, which can help you access better loan terms. The pre-approval process will provide concrete data regarding how much you can afford to borrow. That information is powerful and might alter the types of houses and neighborhoods you’re considering.

Interest rates and personal and auto loans

How changing interest rates impact personal loans is a bit less direct, Guidone says. Personal loans tend to have higher rates than mortgages, and the rates are based more on demand for the product and borrower risk. The circumstances of personal loan borrowers also come into play.

“Borrowers in this space are less concerned about timing their loan to rates,” Guidone says. Instead, they often need the cash to fund an immediate expense. Many personal loans have a fixed interest rate, so existing borrowers won’t see a change, even if rate cuts occur. Borrowers who have adjustable-rate loans could see their monthly payments lower, though that depends on the product and lender.

Personal loan borrowers often use the loans to consolidate existing debt, rolling balances from multiple high-interest credit cards into a relatively lower-rate personal loan. It’s a smart move that can save borrowers money, especially if the interest rate on the personal loan is significantly less than what they were previously paying.

“It’s an effective way to pay down debt,” Guidone says. Consolidation can improve financial stability by lowering rates or simplifying payments, influencing individual decisions. Given the accessibility of personal loans through streamlined processes, many borrowers opt to move forward rather than wait.

Personal and auto loan rates remained stable in 2024, and most banks are not forecasting for dramatic reductions this year. If you’re considering a loan in this space, Guidone says that taking the time to improve your credit score can make a big difference in the products available to you.

The tech advantage

It’s hard to provide exact predictions of when — or if — interest rates will shift. However, automated loan approval tools can give borrowers some certainty in a changing rate environment.

Take advantage of Northwest Bank’s technology to get pre-approved for personal loans or pre-qualified for a mortgage. You’ll receive meaningful information to accelerate your loan process and inform your purchase.

“You go into the process knowing what you can afford and how far your money will go,” Diina says. “The technology gives you an edge that lets you make even smarter decisions about your personal finances.”

Interested in learning more about mortgage and personal loan products? Connect with Northwest Bank’s lending experts today.