Kevin O'Leary Says If You Are Waiting For Mortgages To Fall Below 5%, You Can Keep On Dreaming Thanks To AI
Kevin O'Leary, a prominent investor, predicts that U.S. mortgage rates will not fall below 5% due to a strong economy and AI-driven productivity. He describes past lower rates as an anomaly and advises homebuyers to adjust expectations, suggesting they buy smaller homes and avoid spending more than one-third of their after-tax income on mortgages. Current mortgage rates are around 6.58%, with slight declines offering limited relief. Market sentiment is shifting towards acceptance of higher rates, while potential Federal Reserve rate cuts could impact home prices.
"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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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
