Mortgage Rates to Remain Stubbornly High into 2026

[bjl584]

Mortgage rates aren't likely to fall any time soon — here’s why

[disneysteve]

I have to laugh when I read statements like this:

“Anything over 7%, the market is dead,” said Mark Zandi, chief economist at Moody’s. “No one is going to buy.”

The rate on our mortgage when we bought our house was 9%.

[Fishindude77]

Current mortgage rates are fine.
The real freak was a couple years of 2-3% rates.

[disneysteve]

Current mortgage rates are fine.
The real freak was a couple years of 2-3% rates.

Exactly. People have short memories. They have come to think that the historically low rates we had for a bit are normal. They're not. We're just reverting to the mean now.

[Fishindude77]

The low rates were positive for many but I also fear they have gotten some folks in trouble.
Many borrowed to the hilt and upgraded to much nicer homes as they could make the mortgage payments at those rates. Inflation has now made the cost of all of their essentials much more costly and eaten away any financial cushion they may have had.
Hit a big surprise expense like a new furnace or roof and that will get folks in trouble.

Credit card borrowing is up as well as mortgage delinquencies which may indicate some potential trouble.

[bjl584]

I have to laugh when I read statements like this:

“Anything over 7%, the market is dead,” said Mark Zandi, chief economist at Moody’s. “No one is going to buy.”

The rate on our mortgage when we bought our house was 9%.

I did read an article about this subject. I'll have to try to find it.

It basically said that even though rates used to be high, the actually cost of the house, taxes, and insurance, were much more in line with peoples' incomes at the time.
Today, people are dealing with not only high rates but also housing costs that are out of reach

[ua_guy]

I have to laugh when I read statements like this:

“Anything over 7%, the market is dead,” said Mark Zandi, chief economist at Moody’s. “No one is going to buy.”

The rate on our mortgage when we bought our house was 9%.

Yes, but...

32 years ago my parents mortgaged a $300k house at a then-good rate (7.3%? -I'm using a quick google search as a reference). That was an expensive home with nice finishes, 3ksqft. They also put almost 50% down.

To buy the same house today - literally, the one next door with an inverted floor plan, same materials, on the same size lot, and now 32 years old, just sold for $2,000,000. What's the total cost of principal + interest at 7.3%, even if you put 50% (1,000,000) down?

That is the difference.

[disneysteve]

Yes, but...

32 years ago my parents mortgaged a $300k house at a then-good rate (7.3%? -I'm using a quick google search as a reference). That was an expensive home with nice finishes, 3ksqft. They also put almost 50% down.

To buy the same house today - literally, the one next door with an inverted floor plan, same materials, on the same size lot, and now 32 years old, just sold for $2,000,000. What's the total cost of principal + interest at 7.3%, even if you put 50% (1,000,000) down?

That is the difference.

I get that, and I thought about that before I posted. Of course, you also have to look at the median income in that town now compared to 32 years ago. And even that doesn't tell the whole story because you need to look at overall cost of living.

This article shows that Americans don't spend any more of their income on housing now (as of 2023) than they did 40 years ago. That % has remained pretty stable.

https://economistwritingeveryday.com/2023/04/26/spending-on-housing-it-hasnt-really-increased-in-the-past-40-years/

[kork13]

Current mortgage rates are fine. The real freak was a couple years of 2-3% rates.

Yeah, I'm definitely grateful for that period of super-low rates. Definitely made it easier to buy my first house in 2012 with a 2.75% 15yr mortgage (and to plow extra income toward getting it paid off in ~2018).

5-6% seems to be the relatively "normal" state for mortgage rates.

[disneysteve]

Yeah, I'm definitely grateful for that period of super-low rates.

Me too. Even though we bought our house at 9%, we refinanced a few times and by our final mortgage we were at 2.99%. That definitely helped us pay off the house quicker.

[LivingAlmostLarge]

we bought at 6.375% in 2002. We've flipped our way bigger and more expensive. Starting with $15k down and never saving more since then. That allowed us the ability to jump up the property ladder by living in each place and building the equity needed. It's what will allow us to flip our current house into our paid for retirement home/homes. I mentioned i now own 34% of my house from the purchase price. With appreciation we have over $1m in equity growth alone and then some. $15k to $1.5m is that a 100x in 22 years? telling my 23 year old self just buy that 1 bd condo in california. Turned into the best thing for two dirt poor grad students. I should say we saved in the form of principal payments but we've never saved an official down payment more than the $15k we initially had to scrape together back then.

[ua_guy]

The point being missed is why mortgage rates will remain high or even increase, even while the Fed has already cut interest rates. Bonds are attractive in uncertain markets, which is driving up interest rates.

From the article:

Why have mortgage rates increased?


The first thing to know: Mortgage rates are tied more closely to the yield on 10-year U.S. Treasury bonds than to the Fed’s benchmark interest rate, said Baker, the founder of Claris Financial Advisors.

Those Treasury yields were about 4.6% as of Tuesday, up from about 3.6% in September.

Investors who buy and sell Treasury bonds influence those yields. They appear to have risen in recent months as investors have gotten worried about the inflationary impact of President Donald Trump’s proposed policies, experts said.

[LivingAlmostLarge]

The point being missed is why mortgage rates will remain high or even increase, even while the Fed has already cut interest rates. Bonds are attractive in uncertain markets, which is driving up interest rates.

From the article:

They also have not gotten inflation to the target 2% rate.

[kork13]

They also have not gotten inflation to the target 2% rate.

But if the president demands that interest rates come down, it's gotta happen! He can make inflation go down too, because he's the president!
/sarcasm

[LivingAlmostLarge]

But if the president demands that interest rates come down, it's gotta happen! He can make inflation go down too, because he's the president!
/sarcasm

never going to happen. It appears no one control nothing.