When it comes to predicting interest rates, I always advise doing so with a great deal of humility, because there is a strong likelihood that you will be wrong.
That said, unless we see a major economic or geopolitical event, I think we can expect rates to hover in the low sixes and potentially the high fives in 2026, depending on the loan type. Builders should be prepared to keep buying rates down by using forward commitments to help potential buyers make the numbers pencil out.
Affordability will remain the primary challenge for new home sales in 2026. Buyers are looking for options outside the standard 30-year mortgage, but products like 40-year loans do not save enough on the monthly payment to justify the longer term.
What will make a difference is creativity and partnership. Builders can help themselves by expanding their relationships with lenders and learning more about pricing and product nuances.
Every mortgage lender has a different appetite for risk, resulting in notable differences in both pricing and program availability. For example, banks with Community Reinvestment Act requirements often offer very attractive portfolio programs in low-to-moderate income and majority-minority areas to stay compliant.
If I am a builder with a subdivision in one of those qualifying tracts, I am losing potential buyers every day that I am not partnered with a mortgage bank offering those types of loans.
Builders should also consider how to connect mortgage programs to various buyer segments. Baby Boomers can tap into their high equity through Reverse for Purchase programs. Move-up buyers can keep their low-rate mortgages while using HELOCs or closed-end seconds to access equity and buy the home they really want. First-time buyers can explore Home Equity Investment programs, which provide down payment assistance in exchange for shared equity, helping them afford a better home while keeping their payments lower.
My advice for 2026 is simple. Take meetings with new lenders. Builders should have relationships with a bank, an independent mortgage bank, and a mortgage broker. Each has its own strengths, and together they can help you get more buyers to the closing table.
