The interplay of federal borrowing, monetary policy and technological change is poised to keep mortgage rates elevated for years, according to prominent economists and industry forecasters — a prospect that could blunt hopes for near-term relief on home costs.

Larry Summers has framed the problem bluntly: rising U.S. federal debt puts upward pressure on long-term interest rates unless major productivity improvements, notably from artificial intelligence, materially expand growth and fiscal capacity. That assessment underscores a basic fiscal-financial channel. As the government issues more Treasury securities to finance deficits, the supply of safe long-term paper rises and investors demand higher yields to absorb it. Those yields, in turn, set a floor for mortgage rates through price links and risk premia.

Realtor.com economist Fratantoni recently translated that macro view into a concrete housing-market forecast, saying mortgage rates are likely to remain in a 6% to 6.5% range through at least 2028. At the lower end of that band, monthly payments on a typical 30-year fixed mortgage would still be substantially higher than the historically low rates that prevailed earlier in the decade, and the upper end would further curtail purchasing power for would-be buyers.

The implications are immediate and broad. Higher sustained mortgage rates reduce affordability by raising monthly debt-service costs, shrink the pool of qualified buyers, and lower the implicit value of housing stock. That will weigh on existing-home sales and could slow new construction, compounding supply constraints in high-demand areas. For homeowners, elevated rates mean refinancing booms are unlikely to return, dampening consumer cash flow that in past cycles supported spending through home-equity extraction.

Financial markets will watch two variables closely: the path of long-term Treasury yields and whether productivity gains from AI translate into faster potential GDP growth. If AI-driven productivity raises expected future output, it could justify higher fiscal capacity and shrink the debt-to-GDP trajectory, easing risk premia. Conversely, if productivity improvements are incremental or uneven, the debt burden may continue to exert upward pressure on yields, leaving mortgage rates stubbornly high.

Policy options are constrained and politically fraught. Fiscal consolidation through spending restraint or tax increases would reduce issuance needs and could, over time, lower long-term rates; however, such measures can be growth-dampening in the near term. Alternatively, targeted public investments that enhance productivity — in AI infrastructure, workforce retraining and complementary research — offer a growth-oriented path but require time and coordination to influence debt dynamics. Meanwhile, the Federal Reserve faces a delicate balancing act: it must weigh inflation risks against the economic drag of higher borrowing costs for households and businesses.

Long-term trends add complexity. An aging population, rising health-care costs and entitlements are projected to keep structural deficits persistent absent policy change, while technological advances create both upside and distributional risks. For consumers and housing markets, the immediate takeaway is that mortgage-rate relief cannot be assumed; absent a meaningful shift in either fiscal policy or secular productivity, higher rates may become the new baseline for several years, reshaping affordability and the contours of homeownership.