How Do Interest Rates Affect the Texas Housing Market?

No single factor moves the Texas housing market more directly than interest rates. Here is exactly how rate changes ripple through every part of the market — and what the current rate environment means for buyers and sellers in 2026.

How Rates Affect Buyer Purchasing Power

The relationship between interest rates and purchasing power is direct and significant. A $400,000 home with a 20% down payment produces a $320,000 loan. At a 7% interest rate, the monthly principal and interest payment is approximately $2,129. At 6%, that same loan costs approximately $1,919 per month — a savings of $210 per month, or $2,520 per year. At 5.5%, the payment drops to approximately $1,817 — $312 per month less than at 7%. This is why even a half-percent rate change can meaningfully expand or contract the pool of buyers who can qualify for a specific price point.

The Rate Lock-In Effect on Texas Inventory

One of the most significant supply-side consequences of the rate environment since 2022 is what housing economists call the lock-in effect. Texas homeowners who secured mortgage rates of 2% to 4% during the pandemic era are far less likely to sell their homes and take on a new mortgage at 6% to 7% — because doing so would dramatically increase their monthly payment even at the same price point. This has meaningfully constrained resale inventory in Texas even as new construction has helped offset some of that supply gap. As rates gradually ease, more locked-in sellers are expected to re-enter the market, adding inventory.

What Rates Did in 2025 and 2026

The 30-year fixed mortgage rate fluctuated between approximately 6% and 7% through 2025, with the 15-year fixed rate sitting at approximately 5.64% as of late April 2026, down about 0.28% year over year per Ramsey Solutions' market data. The Texas Real Estate Research Center's 2026 forecast assumed a 30-year rate of 5.0% to 5.6% by December 2026 as their baseline projection. If that range materializes, the second half of 2026 could see improved buyer activity and some loosening of the lock-in effect as the gap between existing and new mortgage rates narrows.

What This Means for Buyers in 2026

For buyers in the current Boerne and Texas Hill Country market, the rate environment creates both a challenge and an opportunity. The challenge is that 6% rates are meaningfully higher than what buyers who purchased in 2020 and 2021 are paying. The opportunity is that those same rates, combined with elevated inventory and sellers who are more willing to negotiate, create conditions where buying today — potentially refinancing later if rates continue to ease — is a more attractive position than waiting for rates to drop while competing against more buyers in a tighter market.

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