Mortgage Rates to Stay Above 6% Through 2028, Predicts Mortgage Bankers Association

Fed Rate Cuts and Inflation Outlook

• 🏦 The Federal Reserve is expected to cut rates tomorrow and potentially three to four times over the next six months in response to a weakening job market and slowing economy.
• 📈 However, inflation is predicted to rise due to tariff-induced effects, which will prevent more aggressive rate cuts.

Mortgage Rate Projections

• 🎯 Mortgage rates are closely tied to longer-term yields like 10-year Treasuries, which are expected to rise due to increasing term premiums, inflation fears, and concerns about national debt and deficit.
• 📊 The forecast suggests that 30-year mortgage rates will remain in the 6% to 6.5% range on average, with recent dips to around 6.25% being the lowest this year.
• ⏳ Rates are not expected to move significantly lower and could stay above 6% through 2028.

Housing Market Outlook

• 🏠 2023 was the low point for the housing and mortgage market, with rates touching 8% at one point.
• 📈 Improvements are anticipated in 2024 and 2025, with a projected 5% increase in home sales by 2026.
• 🔑 A significant change is the increase in inventory, with builders adding new units and existing owners listing properties, benefiting buyers.
• 📉 Sellers are experiencing longer selling times, and home prices have flattened nationwide.

Buyer Acclimation and Seller Strategies

• 💡 First-time buyers have largely acclimated to current rates, budgeting for 6% to 6.5%.
• ⚠️ Move-up buyers who locked in lower rates (e.g., 3%) are reluctant to sell and repurchase at higher rates.
• 🏘️ Increased inventory in 2025, up about 30% year-over-year, suggests some are accepting current rates as the new normal.

Builder Incentives and Inventory

• 💰 Builders are offering mortgage rate buy-downs (e.g., to 5.5% or 5%) to move inventory, especially move-in ready properties.
• ⏳ This strategy is expected to continue until new construction inventory returns to a more typical level, with current supply at about 9 months at the current sales pace.