Key facts
- 30-year conforming mortgage rates averaged 7.63% on Tuesday.
- Rates for 30-year FHA loans averaged 7.59%.
- 30-year jumbo loan rates averaged 7.85%.
- Mortgage rates have increased for six consecutive weeks, reaching a nearly three-year high.
- Benchmark Mortgage, New American Funding, and Pennymac have made cuts or closures.
- Sixty percent of surveyed Americans would prefer owning half a home to renting.
Mortgage rates are nearing 8%, a significant increase that is putting financial pressure on lenders and raising concerns about potential industry cuts and closures. The average rate for a 30-year conforming loan reached 7.63% on Tuesday, with FHA and jumbo loan rates also seeing sharp increases in the past two weeks.
Industry professionals, who had anticipated sub-6% rates at the start of 2026, are now facing a challenging environment. Bob Broeksmit, president and CEO of the Mortgage Bankers Association, noted that affordability and borrower demand have weakened due to the higher-rate environment, which is impacting both homebuyers and those looking to refinance.
Melissa Cohn, regional vice president at William Raveis Mortgage, expressed concern that some lenders may be struggling to survive, drawing parallels to the sharp rate increases seen in 2022. She highlighted that bond yields are at multi-decade highs, contributing to the upward pressure on mortgage rates.
Several lenders have already taken action. Benchmark Mortgage closed its wholesale and correspondent division to focus on retail lending. New American Funding reduced its workforce by 160 jobs in its consumer-direct channel, and Pennymac cut lending and fulfillment roles while closing an office.
Hector Amendola, president of SimplyPMG, advised that waiting for lower rates is not a productive strategy, emphasizing that no one can accurately predict future rate movements. He suggested that each month spent waiting to secure a lower rate is a month spent paying a landlord's mortgage.
To combat affordability challenges, Mat Ishbia, president and CEO of United Wholesale Mortgage, pointed to the Federal Housing Finance Agency's (FHFA) adoption of VantageScore 4.0 for loans sold to Fannie Mae and Freddie Mac. He believes this and other competing credit-scoring models will help borrowers secure lower loan-level price adjustments and mortgage insurance. Additionally, a recent FHFA move to align mortgage insurance cancellation rules for Fannie and Freddie could offer some relief to current borrowers.
Ishbia also highlighted the substantial home equity held by U.S. homeowners, suggesting opportunities for lenders through cash-out refinances and home equity lines of credit, driven by rising housing values.
Despite the high rates, consumer sentiment toward homeownership remains relatively positive. A survey by Neighbors Bank found that 60% of respondents would prefer to own a share of a home rather than continue renting, with this figure rising to nearly 70% when co-ownership involves family. Lower-income households were more likely to consider shared homeownership with friends.
First American's Real House Price Index indicates that rising rates have significantly impacted homebuying power. While affordability was 3.5% better year-over-year in July due to lower rates at that time, the current rates above 7% have reduced the typical borrower's purchasing power by approximately $19,000. Mark Fleming, chief economist at First American, noted that while slower house price growth and rising incomes are still tailwinds, higher borrowing costs are increasingly consuming these gains.