For many Americans, buying a home is starting to feel out of reach, and it's not just because of high prices. Mortgage interest rates are adding hundreds of thousands of dollars to the cost of homeownership, stretching budgets and changing expectations. We looked at how much buyers in 50 major U.S. cities are paying in interest today, how that compares to past years, and what first-time buyers say would actually make homeownership feel possible.

Key Takeaways

• At current mortgage interest rates (6.89%), homeowners in major U.S. cities will spend an average of $489,898 on interest over the lifetime of a 30-year loan.
• 23% of potential first-time homebuyers say the most they would be willing to pay in lifetime interest is $200K–$300K, much less than what the average buyer would pay under current conditions.
• On average, the homebuying power of Americans in the top 50 U.S. cities has dropped about 12% from 2005 to today.

Home Prices Across Cities

The true cost of homeownership goes far beyond the listing price, especially when mortgage interest is factored in. At today's average interest rate of 6.89%, homeowners in major U.S. cities are projected to spend an average of $489,898 in interest over the life of a 30-year loan. That's hundreds of thousands of dollars paid in addition to the home's original purchase price.

Even modest changes in interest rates could make a significant difference. If rates dropped just slightly to 6.5%, buyers in these cities would save an average of $33,330 in lifetime interest. A larger drop to 6% would result in even more substantial savings, an average of $75,235.

These figures highlight how sensitive total mortgage costs are to market rates and why timing matters. For first-time buyers or anyone entering a competitive housing market, even a small reduction in rates could make homeownership significantly more affordable over the long term.

The Real Cost of Today's Mortgage Rates

For homebuyers in today's market, the sticker shock doesn't end with the sale price. Adding to the financial strain, Americans' buying power has steadily declined over the last 20 years.

Rising mortgage rates and home values have chipped away at what a dollar can buy. Compared to 2005, Americans' buying power has dropped by roughly $42,000, meaning they can afford about 12% less home on the same income today.

The affordability buffer, or how much more home you could afford above the median price, has also shrunk. In 2005, a buyer earning $100,000 annually with a 20% down payment could afford a home priced $327,000 above the national median. In 2025, that buffer has dropped to just $24,000, leaving little room for flexibility in size, location, or condition.

The picture has worsened even more dramatically in the past 5 to 10 years. From 2015 to 2020, buying power in the top 50 U.S. cities dropped roughly 30%. That means buyers today can afford about $170,000 less due solely to interest rate increases.

What First-Time Homebuyers Are Thinking and Hoping

High interest rates are forcing first-time buyers to rethink not only when they'll buy, but whether homeownership is realistic at all.

Nearly 8 in 10 first-time homebuyers have put off buying a home because of high interest rates. While 45% still believe owning a home is realistic for them, 36% anticipate waiting at least 3–5 years, and 23% don't expect to buy one anytime soon.

When asked what rate would make homeownership feel feasible, nearly one-third said they'd only feel comfortable buying if interest rates dropped to 3.5% or below. Gen Xers were the most likely to say this (45%). However, only 9% said they'd actively look to buy if rates dropped to 6%, signaling that buyers aren't just waiting — they're waiting for a meaningful change.

Perhaps most sobering, 15% of prospective buyers don't believe any rate would make homeownership affordable for them. Gen Z was the generation most likely to say so, at 19%.

For many first-time buyers, the dream of homeownership is increasingly at odds with their budget. Almost a quarter (23%) said they're only willing to pay $200,000 to $300,000 in total mortgage interest, far less than the nearly $490,000 that would be paid under today's average 30-year loan terms. This gap can make homeownership feel out of reach.

Overall, 44% of potential first-time homebuyers said they regret missing out on feeling financially secure due to not being able to afford a home. The top regrets by generation were as follows:

• Baby boomers: financial security (55%) and building generational wealth (18%)
• Gen X: not living in their preferred neighborhood/city (11%) and retiring early (10%)
• Millennials: having children (8%)
• Gen Z: hosting family and friends in their own space (13%)

Conclusion: Waiting for Change

Mortgage rates can shape what kind of life buyers believe they can build. From shrinking affordability buffers to long-term interest burdens, the cost of buying a home today is forcing hard decisions and reshaping homeowner dreams.

Yet, many buyers are still watching, waiting, and hoping for change. If interest rates fall meaningfully, it could unlock a major shift in buying power and confidence. For now, the best strategy is to stay informed, understand your financial limits, and prepare for opportunities that may lie ahead.

Methodology

For this study, we collected information from Freddie Mac and Zillow to gather historical data on 30-year mortgage interest rates and median home values across the top 50 most populous U.S. cities. We examined current median housing prices and interest rates, as well as median prices and rates for 2005, 2015, and 2020. We calculated affordability for a 30-year mortgage based on a $100,000 annual income, with a $2,000 monthly budget and a 20% down payment.

We also surveyed 970 respondents ranging in age from 18 to 77 to explore how potential first-time homebuyers feel about current mortgage rates. The mean age was 28; 41% identified as male, 58% as female, and 1% as nonbinary. Generationally, 3% were baby boomers, 14% were Gen Xers, 55% were millennials, and 28% were Gen Zers.

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