First-time buyers have ‘no low-rate mortgage to surrender’—and with rates back above 7%, one-quarter are leaning on family for the down payment

Meanwhile, many current homeowners are holding on to the low rates they locked in during the pandemic, but first-time buyers don’t have that option. As Odeta Kushi, deputy chief economist at First American Financial Corporation, recently put it, they have “no low-rate mortgage to surrender,” so they’re facing today’s rates head-on.

“For many younger buyers, mortgage rates below 3% became their reference point, even though those rates were historically exceptional,” Kushi told Fortune. “So today’s rates can feel expensive by comparison, particularly when home prices are also significantly higher.”

Mortgage rates peaked in the early 1980s in the 18% range. But today’s new homebuyers are unlikely to remember that time, leaving them frustrated by how unaffordable today’s housing market feels. 

But for most first-time buyers, the 3% era isn’t really the sore spot anymore. Several real estate agents told Fortune their clients have largely accepted that those rates aren’t coming back. What stings more is how this year played out—and how stubbornly high home prices are.

Mortgage rates fell to a low of 5.98% on Feb. 26, according to Freddie Mac. Then they climbed back, averaging 7.40% the weeks of Oct. 8 and Oct. 15, the highest since November 2023. Meanwhile, the average existing home price is still about 25% higher than it was when the pandemic first started, National Association of Realtors data shows. 

“It’s almost as if just as first-time homebuyers were accepting the 6% rate and hoping for 5’s, the mortgage rates decidedly took another leg up,” Ken Sisson, an associate broker with Christie’s International Real Estate Southern California in Los Angeles, told Fortune. Most of what he hears from first-time buyers now, he said, is disappointment that they aren’t being quoted rates in the low 6s. But more recently, affordability has been a “significant challenge,” Sisson added. 

“The mortgage rates obviously are half of the story related to that affordability challenge,” he said. “The other half of the story is the home prices. My first-timers are well aware that the local prices were driven up significantly by the pandemic-era low rates.”

But even buyers who can handle the monthly payment face a bigger hurdle: the down payment. Unlike repeat buyers, first-timers don’t have equity from a home sale to put toward their next purchase.

“Even when someone earns enough to comfortably afford a monthly mortgage payment, saving tens of thousands of dollars for a down payment and closing costs can take years,” Kushi said. Her research identified nearly 1.3 million “shadow homeowners,” or young adults living with family whose characteristics suggest they could be future homeowners. 

“Many are older and further along in their careers,” she said. “They’ve delayed forming their own households, and accumulated savings may help some of them eventually make the leap.”

So for a growing number of first-time buyers, the cash they need to buy their first home is coming from their parents.

“There is currently a massive transfer of wealth from boomers going on,” Veronique Perrin, a real estate agent at Christie’s International Real Estate New York, told Fortune. “I am working more and more with buyers who are doing this with their parents’ help. There is a lot of gifting happening, and most of the deals I have worked on lately involved one.”

Perrin, who said she is a baby boomer herself, said she’s having those conversations “more and more” with her peers. Nationally, 25% of first-time buyers used a gift or loan from family or friends toward their down payment, according to the National Association of Realtors’ 2026 Profile of Home Buyers and Sellers, released Thursday.

Still, Kushi said first-time buyers who feel they missed out should remember what buying a home actually looked like when rates were below 3%.

“Multiple-offer bidding wars were everywhere, buyers routinely waived contingencies, and fierce competition helped push home prices up at double-digit annual rates,” she said. “Getting a low mortgage rate often meant competing in an extremely difficult market.”

Today’s buyers face higher borrowing costs and prices that remain elevated, but in many markets the balance has shifted in their favor in other ways, Kushi said. Homes are sitting on the market longer, buyers have more choices, and sellers are more willing to negotiate on price or offer concessions, such as help with closing costs or mortgage rate buydowns.

“There’s something to be said for having the time and negotiating power to find the right home at the right price,” she said.