As 30-year fixed mortgage rates in the U.S. creep well past 7%, prospective homebuyers are likely wondering how this will impact their ability to own a home.
While mortgage rates are only one part of the equation, a July 2026 Neighbors Bank study found that 72% of surveyed homebuyers put their home search on ice while waiting for better rates.
Zoocasa compiled data from the past 50 years to examine how mortgage rates impact homeownership by age, income, race and price. What we found is that young homeowners often get sidelined as rates rise, while lower earners appear to gain momentum when interest rates dip lower. Meanwhile, non-white Americans tend to feel the effects of mortgage rates more than their white counterparts.
“The rise in rates we’re seeing now might look scary, but history shows it’s not the first time rates have been this high, and it likely won’t be the last,” Zoocasa’s Industry Relations Officer Brittany Kostov said. “The key is being aware of the market and how these changes might impact you–that way you can find the right time to make your move.”
Who Controls Mortgage Rates?
Mortgage rates aren’t controlled by a single entity, but they are often most heavily influenced by the U.S. Federal Reserve, which sets its federal funds rate through eight scheduled meetings annually.
The federal funds rate determines how much banks charge to lend or borrow from each other overnight, according to Investopeida. When banks have more money than they need in a Federal Reserve Bank, that money can be lent to other banks in a shortfall.
When the federal funds rate is higher, it discourages borrowing by making it more costly. On the flip side, a lower rate can encourage more borrowing by making it less expensive. This directly impacts the housing market, with the federal reserve rate and 30-year fixed mortgage rates often moving in tandem.
For instance, on Sept. 16, the Federal Reserve Bank raised its target interest rates by 0.25% to a target of around 3.75%-4%. The impact on mortgage rates was almost immediate, according to Freddie Mac data. The average mortgage rate in the U.S. jumped from 6.95% on the week of Sept. 17 to 7.4% by the second week of October. That’s the highest rate since November 2023, when the Fed was working to tamper down post-pandemic inflation.
This relationship is key because mortgage rates can drastically change how much a homeowner is expected to pay over the course of their mortgage.
For instance, the median price of homes sold in August was $429,100. For the same home with a 10% down payment and 30-year fixed mortgage, the amount paid over the lifetime of the loan can be more than double your actual home cost, depending on the mortgage rate.
While some economists previously predicted rates would drop below 6% this year, some major analysts like Bankrate don’t believe rates will drop below 7%. Some believe that even 8% or 9% interest rates could be on the table in the next several months if economic conditions don’t improve.
How Do Mortgage Rates Impact Home Prices?
In general, mortgage rates have an inverse relationship with home prices, according to Chase Bank. When rates are up, home prices are gradually driven down. Likewise, when rates are down, home prices are driven up.
For much of the last 40 years, 30-year mortgage rates have been on a trend of decline following the historic highs of the ‘80s, data shows. By comparison, home prices in that time have trended upward.
But this is not a hard-and-fast rule, and there are several exceptions. Rising prices in 2022 and beyond despite higher mortgage rates is one of those exceptions, driven largely by the U.S. Federal Reserve’s attempts to limit post-pandemic inflation.
The 2008 housing crisis is another exception, although it was driven by far more complex events.
What Happens When Mortgage Rates Get This High?
From the 1970s to now, the data is pretty clear–when mortgage rates rise, homeownership rates fall. This change is not solely attributable to mortgage rates, but there is a correlation.
From the ‘80s to the early ‘90s, mortgage rates saw seismic shifts, peaking around 18% in 1981 before largely declining in the following decades, according to Freddie Mac. The rise in rates seen in the ‘80s was triggered by severe inflation, thought to partially be a result of oil crises in 1973 and 1979, with the Yom Kippur War and the Iranian Revolution disrupting oil exports.
Inflation devalues currency. If the money being lent is actively losing its value, lenders typically want to recoup those losses in the long-term with higher interest rates. That’s what results in increased borrowing costs as inflation worsens, and in the case of the energy crisis, America paid the price.
Following the drastic increase in interest rates in the ‘80s, America entered a recession in 1981-82, considered the second-worst recession in U.S. history, according to Federal Reserve History. Inflation reached 12.2% in 1980, while unemployment neared 11% in 1982. All the while, homeownership dipped from 66% in 1980 to a low of about 63.5% in 1985. It took almost 10 years for homeownership rates to consistently see gains above 65% again.
While inflation and the energy crises prompted the second-worst recession in recent history, the U.S. housing market prompted the worst in 2008.
What Caused the 2008 Recession?
The 2008 financial crisis is a unique situation in real estate history, representing the convergence of several factors that built up over time, according to Federal Reserve History.
The first factor is predatory lending practices, known as subprime mortgage loans, which opened up mortgages to many who would otherwise struggle to get them. These loans from non-government-backed institutions typically accepted applicants with lower credit scores and little history of good financial standing. That meant more home sales, signaling higher demand to the broader market.
That higher demand brought with it a host of buyers interested in purchasing a home, but not to live in–these homes were investments, purchased in the hottest upcoming areas to max out future gains on home appreciation.
Over time, both of these elements artificially inflated home prices to levels not seen before, with national median prices rising about 57% from Q1 2000 ($165,300) to Q1 2007 ($257,400). During this time, borrowing costs were also much lower than the prior decade, with rates dropping from 8.2% in 2000 to 5.7% by 2005.
By 2007, the combination of lower borrowing costs, looser lending standards and higher home prices led to increased mortgage loss rates or loan defaults. As a result, several of the banks financing these loans were on the financial outs, and many filed for bankruptcy.
As banks suffered the losses, fewer were willing to take on risky subprime mortgages, resulting in lower home sales and prices that fell drastically over the next few years. This made it difficult for borrowers to sell their homes to pay off their mortgages.
Combined, these factors resulted in a housing market decline that would lower residential real estate’s contributions to the nation’s economic health, with lower construction, reduced wealth, lower spending and less lending.
In an effort to stimulate the economy after the 2007-11 recession, the Federal Reserve kept interest rates at historic near-zero lows, which drove mortgage rates down to a 20-year low of 3.36%. Even so, ownership rates continued to taper off from their early-2000s highs, hitting 62.9% in 2016–the lowest rate since at least 1971.
How Do Mortgage Rates Impact Homeownership by Age?
When it comes to homeownership, data shows there tend to be fewer owners under 35 compared to other age groups, and that is often connected with interest rates.
In 1994, the homeownership rate for those under 35 was 37.1%. By the time 2005 rolled around, that number hit a high of 43.4%–likely related to subprime mortgage loans–before falling off in the mid-2010s.
Although all age groups saw ownership rates decline or remain steady in Q1 2026, homeowners under 35 were hit the hardest, reaching a near-decade low of 35.2%.
Overall, this points to younger homeowners taking the largest hit in the latest economic upset facing the United States, and one which will be difficult to overcome as inflation eats into the ability to save for a home.
“Even though ownership rates for those under 35 tend to be considerably lower, the numbers show it’s not impossible,” Kostov said. “With the right planning, enough savings and being flexible on location or home type, buyers under 35 have been able to make it happen for generations. It’s all about timing, having the cards to play and playing them in a way that makes sense for you and your family.”
How Do Mortgage Rates Impact Homeownership by Income?
When it comes to income, data shows that households earning below the median family income (MFI) are generally less likely to own a home. Ownership rates for those earning above the MFI are typically around 78%-85%, compared to around 48%-55% for those earning below the MFI.
Although both ownership rates respond to mortgage rate shifts, the big difference is that when rates go down, lower-income earners tend to see larger spikes in ownership compared to those earning above the MFI.
For example, in 2020, ownership rates for those earning above the MFI jumped from 78.8% in Q1 to 80.5% in Q2. Meanwhile, those earning below the MFI saw ownership rates increase from 51.8% to 55.2% in the same timeframe–that’s double the percentage point growth.
“When mortgage rates are lower, that’s generally when you’re seeing other, broader signals of economic struggles,” Kostov said. “The housing market is a huge contributor to GDP, so it’s one of the first industries the government turns to when it wants to get the economy moving again. Because of that, lower rates tend to be a win-win for lower-income buyers and sellers alike–you’re getting a home that will cost you less in the long run, and the economy is seeing the benefits of a recovering market.”
Interestingly, since the late 2000s, ownership rates for those earning above the MFI have trended downward, while those earning below the MFI have remained steady.
How Do High Mortgage Rates Impact Ownership by Race?
Historically, people of color in America own homes at lower rates compared to white Americans. In Q2 2026, the rate of homeownership for white Americans was 74.5%, compared to 55.8% total for all non-white races.
Historically, there have been many roadblocks put in front of black and brown Americans that have prevented them from owning a home. From an outright ban on homeownership to redlining and gentrification, people of color in America have often been systemically forced out of homeownership and building generational wealth.
Not all races are affected by this trend equally, though. Black Americans especially have had lower-than-average homeownership rates, around 45.4% in Q2. Hispanic Americans also face considerably lower homeownership rates than average at 48.1% in Q2.
When it comes to mortgage rates, white homeownership has remained relatively consistent over the past 30 years, regardless of mortgage rates. This is not the case for non-white races in America. Black, Hispanic and other races in America tend to be more heavily impacted by mortgage rates and their associated economic drivers, with higher proportional spikes in ownership when rates decrease, and lower ownership levels when rates increase.
What Do High Mortgage Rates Mean For Homebuyers?
In general, higher mortgage rates mean fewer home sales, higher borrowing costs over time and lower homeownership rates for earners below the MFI, people of color and those under 35.
The upside? Higher rates also tend to drive prices down over time. Real estate is considered a boom-and-bust industry, and history shows it’s only a matter of time until rates come back down, meaning there will likely be opportunities to find a foothold in the market once rates decline.
If you’re waiting for the right time to buy, you don’t have to figure it out alone. Zoocasa has agents across America who can help you decide when the time is right. Reach out today for more information.
