Americans hoping to buy a home in the next few years face challenging conditions. After mortgage rates peaked near 8% last year, they briefly dropped to around 6% in September but have been rising again. This week, the average rate for a 30-year fixed mortgage is 6.84%, marking the seventh increase in the last eight weeks, according to Freddie Mac.
Experts predict rates will stay above 6% for at least two years. Lawrence Yun, Chief Economist at the National Association of Realtors, believes 6% will be the “new normal,” with lower rates unlikely to return. This means borrowing will remain expensive, making it difficult for many to afford homes.
Wells Fargo economists forecast mortgage rates will average 6.3% by the end of next year and remain steady through 2026. Fannie Mae also raised its outlook, projecting rates will average 6.4% in 2025 and 6.1% in 2026.
These high rates are already slowing home sales, which are expected to reach their lowest point since 1995. Rising home prices and mortgage rates are pricing out many buyers, and while the brief dip in rates earlier this year didn’t spark much buying activity, home prices continue to rise.
Several factors could keep mortgage rates elevated. Proposed policies from President-elect Donald Trump, such as tax cuts and increased spending, could stoke inflation and keep the Federal Reserve from lowering rates. Higher Treasury yields could also push mortgage rates up.
Despite these challenges, the job market remains strong, wages are rising, and more homes are becoming available for sale. While higher mortgage rates are expected to persist, these factors may help stimulate some home buying. However, for many, high borrowing costs will continue to be a major barrier to homeownership.