The housing market remains stuck between higher borrowing costs, limited supply, and elevated home prices. Now a new study from the Pew Charitable Trusts says stricter lending rules are also keeping many prospective buyers on the sidelines.
The numbers come first. The benchmark 30-year fixed rate mortgage rose to 6.76% from 6.71% last week, Freddie Mac said Thursday. That is up from 6.35% a year ago and the highest rate since June 2025. On the same day, the National Association of Realtors said sales of existing homes fell 2% last month from July to a seasonally adjusted annual rate of 3.98 million units. That was the third straight monthly decline and a 1.2% drop from a year earlier.
Pew's study said tighter standards put in place after the housing crash that sparked the Great Financial Crisis reduced delinquencies and defaults, but also made it harder for many Americans to qualify for a mortgage. Adam Staveski, a principal associate with Pew's housing policy initiative, wrote that these changes helped curb abuse of 'liar loans' that required little proof of income.
The burden is falling hardest on borrowers with moderate credit scores of 600-699. From 2005 to 2024, the share of mortgage originations going to that group fell by 13.3 percentage points to 22.3%. Over the same period, the share going to borrowers with credit scores of 700 or higher rose by 24.9 percentage points.
Staveski said that although borrowers now take on more debt as a share of income than ever before, they must have a pristine credit history to be approved for a loan. He also said credit scores tend to reward long credit histories and adequate financial cushions, creating a close correlation with age, income, and wealth.
That means the tight lending environment disproportionately hits young adults entering the housing market, lower-income families, rural communities, and Black and Hispanic households, according to Staveski. He added that some potential borrowers may not be financially prepared, but others are excluded because of thin or nontraditional credit histories, or because federal credit standards are historically high.
Thomas Ryan, senior North America economist at Capital Economics, said mortgage rates will almost certainly rise above 7% as the 10-year Treasury yield reaches its highest level since 2023. He said their projection that existing sales would average 4.1 million this year now looks slightly optimistic, with transactions more likely to average closer to 4 million, which would be their weakest annual outturn since 1995.
For households trying to buy a home, this is what policy and market distortion look like in practice: higher rates, tighter credit, and fewer transactions. Capital rewards clear rules, but when the administrative state turns mortgage approval into a test of perfection, ordinary buyers pay the price and free enterprise gets less room to work.
