:max_bytes(150000):strip_icc()/GettyImages-2079439114-0738e32e30724de49334fe546ac4f121.jpg "There’s No End in Sight For High Mortgage Rates")
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Key Takeaways
- The Mortgage Bankers Association said that mortgage rates could be as high as 6.5% at the end of 2026, while Fannie Mae projections show rates as high as 5.9% at that time.
- That would mean an extended period of elevated mortgage rates not seen in more than two decades.
- Experts have predicted mortgage rates need to fall to 5.75% to bring buyers back into the housing market.
The Fed is poised to cut interest rates again next week, but it may not matter much for the housing market.
Recent projections show that mortgage rates are likely to stay high through 2026. And that’s after factoring in the half a percentage point of cuts to the federal funds rate that’s expected before the end of the year. It’s a gloomy forecast for a housing market that has been stifled by the highest borrowing costs in decades.
The Mortgage Bankers Association projects that mortgage rates could be as high as 6.5% at the end of 2026 and possibly as high as 6.2% through 2027. Mortgage giant Fannie Mae has similarly high projections, anticipating that mortgage rates will be at or above 6% until the fourth quarter of 2026, when they dip to 5.9%.
Why This is Important
Housing is a critical driver for the U.S. economy, fueling construction and consumer spending. But elevated mortgage rates and high prices have slowed real estate activity to a crawl in recent years. High rates are not only a drag on GDP, they price out potential buyers and limit mobility for people who have locked in lower rates.
MBA economists Mike Fratantoni and Joel Kan said in their 2026 outlook that slower economic growth and higher unemployment levels will help keep yields on the 10-year Treasury note at around 4.2%, which has a stronger influence on mortgage rates than the Fed-controlled federal funds rate. In fact, mortgage rates actually ticked higher after the Fed’s most recent interest rate cut in September.
“The risk of growing budget deficits and elevated inflation expectations will keep longer term rates from falling further, even as the Fed cuts short-term rates,” the Mortgage Bankers Association said in a release.
Historical Context For Mortgage Rates
High mortgage rates—above 6% for more than three years—have been a big part of why housing has been so unaffordable in recent years. Elevated borrowing costs, along with a surge in housing prices in the years following the pandemic, have led to the slowest home sales in decades.
Rates have now been above 6% for more than three years, the longest streak since 2005-2007. But history shows that rates at that level or above were fairly common before that.
In fact, mortgage rates had never been below 6% since 1971, when Freddie Mac began tracking the data. They peaked at more than 18% in 1981.
Still, many borrowers remember the sub-5% rates that came in the wake of the 2008 financial crisis, and then the extraordinary sub-3% rates during the COVID housing boom.
Rates won’t have to get quite that low to breathe life into the housing market. Housing industry experts forecast that a mortgage rate level of 5.75% would likely bring a rush of buyers back into the market.
