It’s a warning that will raise alarms for homeowners with mortgages, and those looking to buy: the possibility of continued high mortgage rates.
The warning comes from the former Treasury Secretary, Larry Summers, who said in a speech in mid-October, that he thinks “it’s more likely that long [term] rates are going to go up rather than down, given the fiscal pressures on the economy (1).”
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Summers, speaking at the Mortgage Bankers Association (MBA) annual conference, cautioned that increasing federal deficits could mean that mortgage rates will rise.
“One scenario is that growth continues more or less as it has for the last 20 years. If so, the current federal fiscal trajectory is unsustainable,” he said. This scenario would mean that the bond market “[hits] a wall,” Summer said, which in turn would impact the 10-year Treasury Yield, which influences mortgage rates (2).
Where are mortgage rates now? Where are they heading?
According to U.S. Federal Reserve data, the average 30-year fixed mortgage rate sat at 6.19% in mid-October (3). This is lower than the average rate at the same time last year, which was 6.44%.
Mortgage rates have remained high since 2022, when the average 30-year fixed-rate mortgage climbed from 3.45% in January to 6.42% in December of that year; average rates have not fallen below 6% since.
Amid hot inflation in 2022, the Fed raised interest rates, and mortgage rates followed (the Fed does not set mortgage rates, but the interest rates set impact the mortgage rates that lenders offer). As mortgage rates hit highs not seen in decades, the housing market also saw increased demand and low supply, causing prices to surge (4).
High mortgage rates have remained a factor in the affordability crisis. New home sales have been slow in 2025, and Fannie Mae’s projections for U.S. total home sales in 2025 are lower than 2024 sales totals (5).
Predictions for where mortgage rates are heading for 2025 and 2026 are generally rosier than the picture painted by Summer. According to Fannie Mae projections, mortgages will fall to 5.9% by the end of 2026. However, rates may tick up before the end of this, with Freddie Mac projecting that December 2025 rates may climb back up to 6.4% (5).
Read more: 22 US states are now in a recession or close to it — protect your savings with these 5 essential money moves ASAP
Is it time to buy?
Homebuyers may be flummoxed by what to do, given the uncertainty of what is to come for mortgage rates. There are risks to waiting to see if mortgage rates will fall. Given the high rates that have dogged homebuyers, if rates fall, there is a possibility that competition among buyers will increase. Of course, if supply in the housing market is low, this could mean that prices surge. Inventory levels will likely vary depending on what part of the country you live in.
So, what are prospective homebuyers to do? One strategy could be simply to focus on what you are able to afford. If you’re able to find a home in your desired area and secure monthly mortgage payments that work with your budget, and won’t leave you overextended, it may make sense for you to take the plunge (6).
Experts advise that homeowners keep an eye on interest rates, but there are other things to keep in mind when you’re thinking of purchasing a home. Your credit score will impact your interest rate, so be sure to check your score. Check for any errors that could impact your score and dispute them with the credit bureau before you apply for a mortgage.
It’s also advisable to compare options from different lenders, in order to find the best rate.
Buying a home is likely the biggest financial decision you will make in your life; it’s not to be taken lightly, and you should make a decision that is realistic given your income level, savings and future earning potential.
And what about those with mortgages who are looking to refinance? Is now the time? According to a report from Forbes, experts generally agree that it can be risky to try and “time the market.” Refinancing decisions depend on factors such as what your initial rate was, and whether you plan to stay in your home long-term (6).
The report notes that, ahead of the expected rate cut from the Fed in September, refinance activity jumped.
As with mortgages, it’s recommended to compare rates from several different refinance lenders, ask lenders if it’s possible to reduce closing costs and work to improve your credit score before refinancing.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Realtor (1, 5); Bipartisan Policy Center (2); Federal Reserve Bank of St. Louis (3); Forbes (4, 6)
This article originally appeared on Moneywise.com under the title: Former Treasury Secretary issues stark warning about the national deficit — could it lead to a mortgage rate spike?
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.