These Unpopular Mortgages May Be the Key to Affordable Housing

Can a mortgage product tainted by the financial crisis come back to revive US housing? The answer could reorient the housing market and give the Federal Reserve greater control over consumer spending in the years ahead.

A lack of affordability has hindered housing transactions the past two years, frustrating would-be buyers and, more recently, hammering the stocks of developers. Those waiting for popular 30-year mortgages to sink to what’s considered a reasonable rate — around 5.5% by my estimation — have been repeatedly disappointed. To the surprise of many, loan rates climbed after the Fed began easing monetary policy last year. They have averaged 6.9% since February 2023, according to data from the Mortgage Bankers Association.