Mortgage Rates Continue to Hold Steady Above 6%, Creating Challenges for Homebuyers

WASHINGTON, CNN — Americans aiming to purchase homes in the coming years face ongoing difficulties as mortgage rates remain elevated. After hitting highs nearing 8% last year, rates dipped to nearly 6% in September. However, they have since climbed, with the average rate on a standard 30-year fixed mortgage reaching 6.84% this week, according to Freddie Mac. This marks the seventh increase in eight weeks.

Experts predict that mortgage rates will persist above 6% for at least the next two years. Lawrence Yun, chief economist at the National Association of Realtors, stated, «The new normal will be around 6%. We are not going to return to 3%, 4%, or 5% mortgage-rate conditions.» Consequently, aspiring homeowners may not see significant relief from lower borrowing costs, potentially excluding individuals from homeownership—a crucial part of the American Dream.

Projections from Wells Fargo economists suggest rates will average 6.3% by the end of next year, maintaining that level through 2026. Similarly, Fannie Mae revised its forecast, predicting average rates of 6.4% next year and 6.1% in 2026.

Home sales continue to decline, with 2023 on track to be the weakest year since 1995, attributed to home price growth and high mortgage rates. NAR data indicate home prices have not decreased in over a year.

Multiple factors, including President-elect Donald Trump‘s economic policies, could exacerbate inflation and impact the Federal Reserve’s interest rate decisions. His proposals may increase spending, necessitating more government borrowing, affecting Treasury yields and, consequently, mortgage rates.

The recent spike in rates is also linked to strong economic data, which may deter the Fed from reducing rates. After rates reached a two-year low of 6.08% in late September, robust employment and retail figures caused an uptick in bond yields. Recent inflation data also contributed to rising yields.

Bernard Baumohl, chief global economist at The Economic Outlook Group, expressed concerns about potential inflation from Trump’s policies, noting the bond market’s sensitivity to inflation prospects.

Amid these trends, personal stories highlight the impact of high rates. Nick Dus of Evansville, Indiana, shared concerns about future homeownership possibilities for his children due to rising interest rates. Dus secured a favorable rate during the pandemic, but worries the next generation might not.

The strong economy does provide benefits, as Yun highlighted job growth and increased housing inventory as positive factors. While the labor market has slowed, unemployment remains low, supporting wage growth and economic stability.

The housing market sees improvements in total inventory as some homeowners feel compelled to sell due to life changes, loosening the so-called lock-in effect. Yun noted, «I don’t anticipate mortgage rates to be significantly different from 6% for most of next year, but I think consumers are getting used to it.» He emphasized the possible boost in home sales from job gains and new household formations.

CNN’s Samantha Delouya contributed to the reporting.