Mortgage Rates May Stay Above 7% Through 2027, the Mortgage Bankers Association Says, Keeping a Squeeze on Homebuyers
The 30-year fixed rate has climbed from 6.16% in January to 7.24%, Freddie Mac data show. MBA economist Mike Fratantoni says purchase applications are down about 15% from a year ago and sees no return below 7% next year.
People hoping to buy a home are not likely to get relief from borrowing costs soon, Fox Business reports.
The numbers. Freddie Mac data show the 30-year fixed mortgage rate rose from 6.16% on Jan. 8 to 7.24% as of Oct. 29. It has eased a little in recent weeks after hitting 7.4% in early October, the highest since the fall of 2023.
The slowdown. Mortgage Bankers Association chief economist Mike Fratantoni told Fox Business the rise has "slowed activity quite a bit" compared with last year. Home purchase applications are down about 15% from a year ago. Refinancing fell further because "at this level of rates there's just not a lot of incentive for folks to refinance their existing loans."
The lock-in. Many current owners hold loans at far lower rates, and with pandemic-era rates below 3% in the past, they are reluctant to sell and take on a new one. "Now with mortgage rates spiking again, that's just going to reinforce that effect," Fratantoni said. He expects home sales and construction to grow more slowly over the next year than they would with lower rates.
The outlook. The MBA's forecast has the 30-year rate "staying above 7% really throughout 2027." Fratantoni said the spike is probably "a little bit overdone," so rates should come down a bit, but they will stay above what the group forecast a few months ago. He said rates are sensitive to events in the Middle East, oil prices and inflation, the Federal Reserve's path, and "very large federal deficits" and growing debt that push long-term rates up.
The stool. Fratantoni described affordability as a "three-legged stool" of mortgage rates, home prices and incomes. Prices have eased in some places and wages are outpacing rents and prices in much of the country, he said, but "this spike in mortgage rates is definitely the hurdle right now," especially for first-time buyers.
Note for readers: the forecast is one trade group's view, and rates can move quickly with the news. Our earlier stories on the Fed's rate decision and September inflation are on the site.