Mortgage rates aren’t doing a whole lot of anything today, and that could start to become the problem.
Bond yields are mostly flat, which leaves the 30-year fixed mortgage hovering around 7.375% or so.
While rates have come down from recent highs of 7.625%, it’s clear from the pending home sales report that the housing market is at a standstill.
If this continues, the industry might face another wave of layoffs, mergers, and folks walking away to find other work.
While I’ve said the “win” for now is simply not going any higher, rates that remain stuck here could do plenty of damage as well.
Higher for Longer Mortgage Rates Back on the Table?
The story lately has been that mortgage rates are going to stay high for longer than everyone expected.
We had a bit of a tug of war over the past few months, but more industry analysts see mortgage rates stuck at these levels this year and through 2027.
For example, Fannie Mae upped their 2027 mortgage rate forecast to 7.5% for the entirety of the year. That’s a big jump from their prior forecast of 6.7%.
Meanwhile, the MBA’s deputy chief economist Joel Kan noted that “Purchase applications fell 18 percent behind last year’s pace, as higher rates are pricing buyers out of the market.”
We already got proof of that in the pending home sales report, which was the lowest on record from NAR going back to 2001.
So basically we’ve got the worst housing market since the turn of the century, on top of what have been some really rough years for the industry.
That means if this merely holds as is, it’ll be enough to lead to more mortgage-related layoffs, closures, and mergers.
Especially vulnerable are the lenders who staffed up early this year, predicting that mortgage rates would finally come down.
They actually did in late February and early march, eventually falling below 6%.
But then we got the Iranian conflict and since then it’s been nothing but higher rates, with a near return to 8% rates again.
Now I’m hearing stories from loan officers and appraisers saying they’ve never seen it this slow.
Eventually that will take its toll and you’ll start to see layoffs, voluntary quitting, and lenders going out of business again.
Buyers Are Staying Away and Refis Aren’t Coming Back Unless Mortgage Rates Drop a Lot
Today’s weekly mortgage application data from the MBA echoed what the pending home sales report told us.
Purchase applications are well below year-ago levels with mortgage rates hovering near 7.5%.
Simply put, it’s not affordable to buy a home today for many folks with rates and prices this high.
Nor is it attractive to sell a home today, knowing you have to go out and become a buyer again as well.
At the same time, refinancing isn’t going to pick up with most homeowners sitting on much lower rates.
This is the mortgage rate lock-in effect I’ve mentioned many times in the past, which is cutting off both sides of the business.
It might also explain why Fannie Mae just slashed its 2027 forecast for loan volume by nearly 20%.
Economic Slowdown Could Be a Silver Lining for Rates and Thus Home Buyers
Now I’m not going to just be all doom and gloom here.
As I’ve said countless times, a slowing economy leads to lower mortgage rates.
So if we do see an uptick in layoffs throughout the housing industry, which accounts for a large chunk of the economy, you might see interest rates drop.
Yes, not the preferred way to get mortgage rates lower, but it’s a way nonetheless.
At the same time, housing inventory will likely start to increase simply with fewer buyers and properties not moving as quickly.
Taken together, you get a housing market with more price cuts, more seller concessions from eager property owners looking to unload, and perhaps lower mortgage rates too.
And as I said, mortgage rates are pricing in all the worst things right now, whether it’s the war(s), high oil prices, inflation, mounting debt, AI-related bond issuance, and a supposed sturdy labor market.
Absolutely nothing is helping mortgage rates right now, so there are many possible levers that can lead to lower rates.
I’d be more concerned if rates were high and there weren’t many paths to get them lower.
Read on: See how much you can afford with my mortgage affordability calculator.
- Stuck Mortgage Rates Starting to Hurt the Real Estate Industry - October 21, 2026
- Mortgage Rates Move Lower Thanks to Record Low Pending Home Sales - October 20, 2026
- Fannie Mae Ups 2027 Mortgage Rate Forecast to 7.5% - October 19, 2026