Most Americans Still Feel Locked In by Their Current Mortgage Rate, Looking for Rates Below 4%

Stubbornly high mortgage rates, elevated home prices, and heightened economic uncertainty have sidelined many potential homebuyers. However, a new survey revealed that millennials are planning to forge ahead amid these market headwinds. Nearly 1 in 4 millennial respondents indicated that they plan to buy a home in the next six months, up from just 15% in September 2024. Just 14% of all respondents plan to do the same. 

Persistently high mortgage rates continue to limit buyer activity. One-third of respondents indicated that they have delayed a home purchase due to still-high rates, consistent with sentiment last fall when rates were near current levels.

Younger generations, many of whom are first-time buyers, are the most affected by high interest rates. More than half of Gen Z respondents (55%) and almost half of millennial respondents (47%) reported delaying a home purchase due to high mortgage rates, compared with just 35% of Gen X and 18% of baby boomers.

When asked where mortgage rates would have to be to consider buying a home, almost a third of respondents reported that rates do not affect their decision to purchase. Just 2% of respondents say they would be willing to buy with rates above 6%, where rates have been stubbornly situated since mid-September 2022. Most respondents (63%) are looking for rates to fall below 5%, or even lower, to consider buying. Roughly 82% of existing mortgages have a rate of 6% or lower, emphasizing the challenge that high mortgage rates continue to present.

To finance a home purchase, most current homeowners used personal savings (57%), while some tapped investments or retirement accounts (15%). A small share (12%) of homeowners leveraged gifts or loans from family members. Interestingly, about 1 in 4 respondents who plan to buy a home in the next six months anticipate pulling from their retirement savings.

Another survey found that half of the potential sellers who have a mortgage feel “locked in” due to high mortgage rates, echoing these results. According to the sellers’ survey, 78% potential sellers think interest rates will either stay the same or increase in the next 12 months. For potential sellers who think rates are going to increase, 43% say this expectation increases their likelihood to sell, and 20% say a rate increase would decrease their likelihood to sell. Interestingly, 69% of potential sellers who think rates are going to decline say this expectation increases their likelihood to sell. This suggests that potential sellers are motivated by interest rate changes and that interest rates affect potential sellers’ likelihood to list.