With mortgage rates breaking through 7%, some home buyers are considering the familiar strategies for lowering their monthly payments: putting more money down, using adjustable-rate mortgages and even buying in cash.
House hunters still face a financial double whammy rarely seen: rapidly rising mortgage rates and home prices that, while growing more slowly, keep hitting record highs. That has made the postpandemic housing market one of the most challenging in recent memory and limits the amount of financial maneuvering available to would-be buyers.
Increasing the size of the down payment would help offset the monthly bill that comes with a higher mortgage rate. But home prices are up more than 50% since 2019, and many buyers are struggling to find the cash to boost their deposits above the typical 10% to 15% down.
That has scrambled the usual buyer playbook for adjusting to higher borrowing costs. Typically, when mortgage rates rise, sellers have to cut prices to keep buyers in the market. But for years, supply has lagged behind as many homeowners have opted to stay put to preserve the 3% to 4% mortgage rates that they secured in the wake of the pandemic.
This lock-in effect-homeowners refusing to sell and give up a low mortgage rate they locked in years ago-has allowed prices to continue rising, even as demand has sagged. The national median existing-home price in August rose 1.6% from a year earlier, to $429,100, an August record. That is despite sales falling to their lowest level and interest rates pushing to their highest point in more than a year.
Median down payments have increased a bit this year as the rise in mortgage rates has encouraged buyers to spend more money upfront to lower their monthly payments. The median down payment in January of this year was $23,053, according to Realtor.com. In August, it was up to $27,166. Over the same period, the median down payment percentage has risen to 13.8% from 12.8%.
But Christina Beitler, who runs a mortgage brokerage firm in Austin, said the recent rise in rates has ground the market to a halt.
"We've all hit a wall. We've pretty much seen a very large stalling of activity," she said. "I do think right now, buyers are taking a step back, taking a moment of pause."
Even in the wake of the 2008 housing crash, when home sales sank, buyers with good credit could take advantage of lower mortgage rates than today and a fall in home prices. Supply benefited from lenders looking to unload millions of foreclosed homes.
Beitler said she recently quoted someone a mortgage rate on a Monday, and by the time they went under contract on a Thursday, the rate had increased over half a percentage point. "They literally just said, 'I can't do this,'" she said, adding that the person terminated the contract.
As older homeowners often point out, before 2001, mortgage rates were just about always above 7%, and in the 1980s, they reached as high as 18.63%, according to Freddie Mac.
As a result, housing affordability was even worse back then, but low home prices allowed buyers to put down larger-percentage down payments to help mitigate the higher rate.
In 1980, the median home value was $47,200, while median household income was $17,710, according to the Census Bureau. Now, home values are up to $368,700, according to Zillow, outpacing income, which in 2025 was up to $87,460. That means that for many buyers, down payments have become far more of a financial burden.
Continued growth in down payments could be modest, mostly because many buyers are already putting down as much as they can and simply can't afford to contribute any more, said First American chief economist Mark Fleming.
"For a lot of the affordability-constrained borrowers, they don't have the option," he said.
Buyers who can are already turning to family members and financial assets to help fund their down payments. According to a survey from the National Association of Realtors released in 2025, 26% of buyers used assets such as stocks and 401(k)s, whether through withdrawals or loans, to help with their down payments, while 22% received help from relatives or friends.
For Emma Finestone and her wife, first-time buyers currently closing on a house in Cleveland, the recent surge in rates is an issue. "Right now, we're dealing with this huge jump at the last minute, and as first-time home buyers, that's something we weren't expecting," she said.
They considered putting 25% down instead of 20%, but didn't want to stretch themselves too much. "My parents, for example, might consider putting more down, but for us it's like, when it's your first time purchasing a home, you still want to have a safety net," she said.
One strategy that economists expect to pick up substantially as rates rise and home prices remain high: creative mortgage structures. At the beginning of the year, just 6.3% of mortgage applications were for adjustable-rate mortgages, according to the Mortgage Bankers Association. For the week of Sept. 18, that portion was up to 9.8%, which doesn't even account for the latest run-up in mortgage rates.
Adjustable-rate mortgages offer a lower fixed-rate, typically for a period of three to 10 years, before returning to market rates once that period ends. In a higher-rate environment, more buyers are willing to gamble on rates in the future for a lower monthly payment now.
But some buyers struggle to qualify for them, with lenders hesitant to offer them to people who might not be able to afford a significantly higher rate in the future, Beitler said.
Jan Otto closed on a home in South Carolina at the end of July. He borrowed money from a family trust to buy in cash to close immediately and is now taking out an adjustable-rate mortgage with an initial rate of 5.75%.
The rise in mortgage rates did force him to buy at a lower purchase price than he otherwise would have been able to afford, and given where rates are now, he felt an adjustable-rate mortgage made sense to save in the short term.
"We totally wanted to save cash flow right now," he said.
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