Key Takeaways
\nThe 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.<\/p>\n
The Fed is poised to cut interest rates again next week, but it may not matter much for the housing market.\n<\/p>\n
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<\/a> that’s expected<\/a> before the end of the year. It\u2019s a gloomy forecast for a housing market that has been stifled<\/a> by the highest borrowing costs in decades.\u00a0\n<\/p>\n 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%.\n<\/p>\n Why This is Important<\/p>\n 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.<\/p>\n 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<\/a> after the Fed\u2019s most recent interest rate cut<\/a> in September.\n<\/p>\n \u201cThe 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,\u201d the Mortgage Bankers Association said in a release.\u00a0\n<\/p>\n Historical Context For Mortgage Rates <\/p>\n High mortgage rates\u2014above 6% for more than three years\u2014have 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<\/a> in decades.\n<\/p>\n 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.\u00a0<\/p>\n 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.\n<\/p>\n Still, many borrowers remember the sub-5% rates that came in the wake of the 2008 financial crisis<\/a>, and then the extraordinary sub-3% rates during the COVID housing boom<\/a>.\n<\/p>\n