Higher Mortgage Rates Cut Buyers’ Purchasing Power by $19,000
A jump toward 7% mortgages also pushed applications lower and increased interest in adjustable-rate loans.
The rise in 30-year mortgage rates between July and September reduced the amount prospective buyers could afford by $19,000, according to First American economists. Shoppers may now need to target less expensive homes, contribute more upfront, or accept a bigger monthly bill. The change also widens the gap between household budgets and current home prices.
Affordability had improved 3.5% from a year earlier in July, but it had declined for five straight months. First American said incomes were up 3.1% from July 2025, while home-price growth slowed to about 1%, providing some relief. Even so, buying power was nearly unchanged from the prior month, slipping 0.3%, though it remained 5% higher year over year.
Mortgage costs continued climbing afterward. Freddie Mac data showed rates near 6.5% in July, while another measure placed conforming loans at 7.34% on Sept. 29. The Mortgage Bankers Association reported a 7.3% conforming rate for the week ending Sept. 25, the highest level since November 2023. Mortgage applications dropped 6%, and adjustable-rate loans made up 10.3% of activity. Realtor.com also found price reductions on about 21% of September listings, offering another affordability offset.
- nationalmortgagenews.com