The Rate Behind Every Mortgage Just Hit a 24-Year High

October 16, 2026

Most investors watch mortgage rates.

Very few watch the number that moves them.

It’s called the 10-year Treasury yield.

In plain English, it’s what the U.S. government pays to borrow money for 10 years.

Banks and lenders use it as a starting point. When it goes up, mortgage rates usually follow. So do most other loans.

On October 7, that number went above 5.35%.

That’s the highest it has been since 2002.

And a week later, Fannie Mae made a big change to its forecast.

Fannie Mae Now Expects Higher Rates Through 2027

Fannie Mae is one of the biggest players in the mortgage world. It buys loans from lenders across the country.

It also predicts where rates are headed.

Not long ago, Fannie Mae expected mortgage rates to average about 6.7% through 2027.

Now it expects about 7.5%.

That’s a big jump.

On a $350,000 loan, the difference between 6.7% and 7.5% is about $190 a month.

That’s about $2,300 a year, for the same house.

Fannie Mae now expects rates to stay above 7% through the end of next year. That changes how buyers shop, how sellers price, and how investors fund deals.

Why Is This Happening?

There isn’t just one reason. Several things are pushing rates up at the same time.

Oil and gas prices. Back in July, we talked about the Strait of Hormuz. Since then, the Iran conflict has knocked a lot of refining capacity offline. Gas prices were up more than 27% over the year through August.

Inflation. Prices are rising faster than the Fed wants. Consumer prices were up 3.7% over the past year as of September.

The Fed. In September, the Federal Reserve raised rates for the first time since 2023. Its own forecast shows about one more increase.

Government debt. The government is expected to run a deficit of about $1.9 trillion this year. Yearly interest costs are now over $1 trillion. All that borrowing means more bonds for sale, and the government has to offer higher rates to sell them.

AI spending. Big tech companies are borrowing huge amounts of money to build AI data centers. Goldman Sachs estimates about $489 billion in AI-related bonds so far this year. That money competes with the government for the same lenders.

Put all that together, and the people lending money want to be paid more.

That’s what a higher rate is.

“Wait for Rates to Drop” Isn’t a Plan Anymore

For the last few years, a lot of people have said the same thing:

“Buy now. Refinance later when rates come down.”

That idea is getting harder to count on.

If Fannie Mae is right, rates could stay above 7% for more than another year.

So if a deal only works because you plan to refinance at 6%, I would not do that deal.

The deal needs to work at today’s rates.

If rates come down later, great. That’s a bonus. It shouldn’t be the plan.

Who Is Still Buying?

Here’s something interesting.

The big Wall Street investors, the ones who own 1,000 homes or more, have been pulling back. Over the last three years, they sold about 135,000 more homes than they bought, according to Realtor.com.

But small investors kept buying.

In 2025, small investors made up about 63% of all investor home purchases. That’s their biggest share in over 15 years.

They were also the only group still adding more homes than they sold.

And they paid a median of about $330,000, roughly 25% below the overall market.

So the small investor isn’t being pushed out.

The small investor is buying cheaper houses, in more affordable areas, with tighter numbers.

That’s the person reading this newsletter.

How Deals Are Getting Funded Is Changing

When bank loans get expensive and hard to get, investors look for other options.

That’s already happening.

Private lenders funded 16.4% of investor single-family purchases in the 12 months ending in June. That’s up from the year before, according to the National Private Lenders Association.

Private money usually costs more than a bank loan.

But it’s faster, and it’s often easier to get for a fix-and-flip or a property that needs work.

In a higher-rate world, creative financing also gets more attention:

• Seller financing, where the seller acts as the bank.
• Taking over an existing loan, when it’s done legally and correctly.
• Partnering with someone who has cash.

A seller with a 3% mortgage and a house that won’t sell might be more open to these ideas now than they were two years ago.

What This Means for Buyers and Sellers

Buyers have less to spend. Every jump in rates cuts how much house they can afford.

Sellers have fewer buyers. That’s why some are sitting longer or dropping their price.

Investors are in the middle.

If you’re buying, you can often negotiate harder.

If you’re selling a finished house, you need to price it for a buyer paying 7% or more, not the buyer from three years ago.

My Take

I think the “cheap money” years are over for now.

The investors who do well next will be the ones who:

• Buy at the right price.
• Plan for today’s rates, not next year’s hopes.
• Know more than one way to fund a deal.
• Find sellers who need a solution, not just a buyer.

When high rates push regular buyers and big investors to the sidelines, small investors with creative funding and a plan for today’s rates face less competition and find more sellers ready to make a deal.

What I’m Watching Next

The Fed meets again October 27 and 28.

In early November, the Treasury will also announce how much money it plans to borrow next.

If the Fed raises again, or the government borrows more than expected, rates could stay high even longer.

Either way, don’t wait for rates to save the deal.

Real Estate Intelligence — Inner Circle Update

Monthly newsletter for Inner Circle members on the latest real estate market updates.

This newsletter is for informational purposes only and does not constitute investment advice. Market conditions can change rapidly due to economic and geopolitical events. Always conduct your own due diligence before making investment decisions.