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What a Recession Would Mean for Mortgage Rates

By U.S. News & World Report

The probability of a recession in the next 12 months is currently around 25%, according to Goldman Sachs estimates. Taken at face value, a recession would be bad news for American workers, since economic downturns are typically met with higher unemployment rates, stagnant wages and stifled consumer spending.

However, what’s bad news for the economy at large could be good news for homebuyers looking to snag a lower mortgage rate.

Borrowing rates on home loans typically decrease during times of economic contraction as the Federal Reserve slashes interest rates to spur economic growth. It’s not as simple as that, though: Mortgage interest rates are influenced by a number of factors, and the path to lower rates will require more than Fed rate cuts. Read on to learn what happens to mortgage financing during a recession and what a shrinking economy could mean for the housing market at large.

Is the U.S. in a Recession? Why 2% GDP Growth Isn’t the Whole Story

Given that consumer confidence is hovering around record-low levels, you might be asking yourself, “Are we in a recession?” The simple answer is no — at least, not by definition. A recession is defined as two consecutive quarters of negative GDP growth. GDP, or gross domestic product, is a measure of the total monetary value of goods and services produced within a country.

Data from the Bureau of Economic Analysis shows that the GDP increased at an annual rate of 2% in the first quarter of 2026, up somewhat from the 0.5% growth measured at the end of 2025. Plus, the Federal Reserve still forecasts positive GDP growth through 2028 in its latest projections materials.

In other words, although finances feel strained at the consumer level, the U.S. economy is still chugging along.

Will a Recession Finally Lower Mortgage Rates? The Historical Reality for 2026 Buyers

Mortgage rates declined during every recession in recent history, except for the 1973–1975 recession of “stagflation” — when inflation was high but economic growth was slow.

Since 2022, when mortgage rates jumped from about 5% into the 7% range, homebuying activity has been relatively stifled. Real estate economists have speculated that the housing market could pick back up if rates began to fall. In fact, two-thirds of homebuyers are waiting for mortgage rates to drop before buying a home in 2026, according to a March U.S. News survey. Although lower mortgage rates are key to affordable housing payments, they’re not the only thing that matters to homebuyers at this crucial juncture. In other words, falling rates may not be enough to lure homebuyers back into the market.

Widespread layoffs have shaken the federal workforce and consumer confidence has taken a nosedive over the past two years, meaning that people simply don’t feel great about the greater economy. If Americans are preoccupied with their job security, they could be hesitant to make such a weighty financial decision as buying a house, regardless of falling mortgage rates.

Additionally, lenders tend to tighten their credit standards during recessions, according to the Federal Reserve Bank of St. Louis. This could make it harder for homebuyers to qualify for a mortgage altogether.

Recession vs. Home Prices: Why the 2008 Crash is Unlikely to Repeat

The 2008 housing crisis means that many Americans associate recessions with falling home prices, but that’s not universally the case. The Great Recession was just one example of how home prices crashed leading up to a recession, but that was a unique moment in housing history. Underqualified borrowers were taking out risky mortgages they couldn’t afford — but lending standards are much stricter in today’s housing finance landscape.

Recessions can certainly lead to decreased housing demand, which could put downward pressure on home prices. But recessions in the early 2000s and 2020 didn’t send home prices spiraling downward.

[Read: Best Mortgage Lenders]

Trying to forecast home price growth (or even housing market crashes) is difficult work. Some economists speculate that tariffs could increase homebuilding costs and mass deportations could cause construction labor shortages, both of which would make homes more expensive to build. But a property is only worth what someone is willing to pay for it.

Housing prices have been holding steady in recent months — but not really rising as expected during the spring homebuying season. Data from the housing platform Zillow shows that for-sale housing inventory has been rising as more sellers list their properties and homebuyers stay on the sidelines. Still, most industry groups are calling for positive home price appreciation in 2026 amid slightly lower mortgage rates.

It’s still too early to tell how the Trump administration’s economic policy — and a potential recession — could impact home prices. For now, you can’t really blame homebuyers for taking a wait-and-see approach when it comes to the housing market.

More from U.S. News

When Will Mortgage Rates Go Down? See the 2026 Forecast

Historical Mortgage Rates: See Averages and Trends by Decade

Should You Wait for Mortgage Rates to Fall to Buy a House?

What a Recession Would Mean for Mortgage Rates originally appeared on usnews.com

Update 05/14/26: This story was previously published at an earlier date and has been updated with new information.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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