Mortgage rates are expected to remain above 6% for the foreseeable future, according to recent projections from the Mortgage Bankers Association (MBA). Chief Economist Mike Fratantoni shared this outlook during the association’s annual conference in Las Vegas, indicating that the 30-year fixed mortgage rates are likely to be in the range of 6% to 6.5% until the end of 2028.
Fratantoni expressed concerns that rising federal deficits alongside inflationary pressures will likely contribute to increased long-term interest rates, rather than a decline in rates. As the Federal Reserve is anticipated to make two more cuts to its short-term policy rate in 2025 and one cut next year amidst rising inflation worries, the impact on longer-term rates is expected to keep the key 10-year Treasury yield above 4%.
This forecast presents a significant challenge for potential homebuyers, who have already faced high mortgage rates over the past three years, with the average rate recently recorded at 6.27%, according to Freddie Mac. Nevertheless, despite the more negative outlook on mortgage rates, the MBA’s predictions suggest that total home sales could rise to over 5 million in the coming year, a slight increase from the 4.8 million anticipated for 2025.
Fratantoni noted that the recent rise in housing supply is a positive factor, providing prospective buyers with more options and putting downward pressure on home prices. The MBA economists predict a national decline in home prices over the next several quarters, followed by a modest increase by late 2027.
Joel Kan, MBA’s Deputy Chief Economist, highlighted the regional variations within the housing market. Some markets in the Sun Belt, including Florida, Colorado, and Arizona, are experiencing declines, while areas in the Northeast and Midwest, such as New York and Illinois, are seeing continued price appreciation due to limited inventory.
As mortgage payment affordability has slightly improved—with typical payments now at $2,067—Kan emphasized that these payments remain significantly higher than five years ago due to overall home price appreciation coupled with current mortgage rates. Borrowers are increasingly opting for adjustable-rate mortgages (ARMs) and FHA loans as strategies to navigate these affordability challenges, while simultaneously facing difficulties from rising taxes and homeowners’ insurance costs.
Overall, while the mortgage rate outlook is sobering, the increase in home supply and projected growth in home sales offer some hope for both prospective buyers and the housing market’s stability in the coming years.