Cloudy weather ahead for home buyers seeking affordability

If you are a prospective home buyer or a homeowner seeking to refinance in 2026, chances are it will be a long, cold winter-or maybe two winters-before mortgage rates decline into an affordable 5% range.

On Dec. 11 the Federal Reserve Board [Fed] lowered its benchmark lending rate a quarter of 1 percentage point to a range of 3.5% to 3.75%-the lowest rate in nearly three years. However, other gloomy political forces are working against bigger near-term interest-rate declines.

The Federal Open Market Committee waded through flackfilled economic outlooks clouded by the following bad-weather political storms:

· Inflation: Accurate economic data evaporated during the record 43-day federal government shutdown in October and November which pitted angry sullen Democrats against Republicans. With key federal workers out to lunch in Washington, D.C., the Fed’s most accurate inflation data was pegged at 2.8% and covered the month of September. This week, analysts said October’s inflation data likely was higher.

· Tariffs: President Donald Trump’s monumental $159 billion in international tariffs on imports to the U.S. have cost the average American household nearly $1,200 in 2025. Tariffs-the highest since 1935-rose a whopping 16.8% from 2.4% last year.

Fed Chairman Jerome Powell said: “If you get away from tariffs, inflation is in the low-2% bracket. It’s really tariffs that are causing most of the inflation overshoot.”

· Job-formation slowdown: The Bureau of Labor Statistics didn’t release an official jobs report for October because of the shutdown. Private sector employment was up 42,000 jobs in October, but 32,000 jobs were shed in November, according to other sources.

The Fed is tracking the slowdown in the labor market. However, Powell noted that President Trump’s immigration policy had an impact on turning the labor supply negative.

Maybe that is why hundreds of Chicagoans were having trouble hiring landscapers for cleanup of autumn leaves, and snow removal teams for the 17 inches of early November snow.

Over time, lower interest rates set by the Fed can bring down borrowing costs for home mortgages, auto loans, and credit cards, though market forces can also affect those rates.

With all this economic gloom in the air, it is no wonder that the Fed’s rate-setting committee signaled that it may keep its rate unchanged in the coming months. And, in a set of quarterly economic projections, Fed officials said they expect to lower rates just once next year.

That means it is likely that home buyers and homeowners seeking to refinance with a 30year mortgage at under 6% may have to wait until 2027.

On the other hand, Powell’s term as Fed chairman ends in May 2026, and President Trump, who has been a harsh Fed critic, likely will appoint a new chairman who favors lower interest rates.

Mortgage rates inch lower On Dec. 11, Freddie Mac’s nationwide Primary Mortgage Market Survey reported that benchmark 30-year fixed-rate loans eased slightly to an average of 6.22% from 6.19% a week earlier. A year ago, the rate was 6.62%.

“The average 30-year fixedrate mortgage is well below the year-to-date average of 6.62%, providing some sense of balance to the housing market,” said Sam Khater, Freddie Mac’s chief economist.

However, 15-year fixed mort- gages averaged 5.54% on Dec. 11, up from 5.44% a week earlier. A year ago, the 15-year fixed loans averaged 5.84%.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place 20% down and have excellent credit. Homeowners who currently have a low 3% to 4% mortgage interest rate and want to stay in their existing dwellings may affordably tap their home equity to expand their living space, renovate a kitchen or add an updated bath.

On Nov. 12, home-equity loan interest rates nationwide slipped to an average of 7.99% from well above 8%. Compare that rate with 19.99% to 30% credit-card interest, which hasn’t budged much despite the Fed’s rate-lowering efforts.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.