Higher rates squeeze home-equity lending and test home sellers

Benchmark borrowing costs moved sharply higher in the third quarter of 2026, putting pressure on lenders and making financed real estate decisions harder to pencil out. Finance of America said the 10-year Treasury yield increased by more than 75 basis points during the quarter as the Federal Reserve shifted from cutting rates to raising them. That is a move of more than three-quarters of a percentage point in a benchmark that can influence housing finance costs.

Finance of America grew lending volume but earned less from it

Finance of America reported a $110 million net loss for the quarter ended Sept. 30, even as funded volume climbed. The company originated $748 million during the quarter, up 24% from $603 million in the same period a year earlier. For the first nine months of 2026, funded volume reached $2.07 billion, a 17% increase.

Most of the reported quarterly loss came from $125 million in noncash fair-value adjustments. These are accounting changes tied to the estimated value of assets and retained interests, rather than an equivalent amount of cash leaving the company. On an adjusted basis, Finance of America recorded $6 million in net income, down from $33 million a year earlier. Adjusted EBITDA fell from $55 million to $17 million.

The company specializes in home-equity financing, including reverse mortgages, rather than serving as a clean proxy for the entire purchase-mortgage market. Still, its results provide a useful signal: consumers continued seeking financing, but higher rates reduced the lender’s revenue margin. The retirement solutions margin fell to 9%, compared with 11.3% in the third quarter of 2025 and a 10.7% historical average since the start of 2024.

Higher borrowing costs can narrow a seller’s buyer pool

For sellers, the important issue is not Finance of America’s accounting loss. It is the rate environment behind the margin pressure. When market yields rise, lenders may reprice products, buyers can qualify for less, and households already near their monthly-payment limit may postpone a purchase or target a cheaper home.

That does not mean buyer demand disappears evenly. Cash buyers and purchasers making large down payments are less exposed to financing costs. Buyers who must borrow most of the purchase price are more sensitive. A property may therefore attract the same number of inquiries but produce fewer offers that are both competitive and financially durable.

Offer strength also becomes more complicated than the headline price. A highly financed offer may include a rate-related financing contingency, a request for closing-cost assistance or less flexibility if the appraisal comes in low. Another offer with a slightly lower price, stronger cash reserves and a larger down payment may carry less closing risk. Sellers should compare the likely proceeds and execution risk, not simply rank offers by price.

Finance of America’s volume growth adds an important counterpoint. Homeowners are still looking for ways to use accumulated equity. For some older owners, a reverse mortgage or another home-equity product may compete with selling as a way to fund retirement needs. That can keep some homes off the market, but it does not eliminate listings driven by downsizing, relocation, maintenance burdens or estate planning.

Rate-sensitive buyers punish ambitious pricing faster

A higher-rate market can lengthen days on market when asking prices are based on older sales or on a period when buyers had more purchasing power. The most useful comparable properties are not merely nearby homes that closed months ago. Sellers should also examine current competition, recent price reductions, pending sales and listings that failed to sell.

The first asking price matters because buyers usually search within firm price bands. If the property is positioned above the range that financed buyers can support, it may miss the strongest pool at launch. A later reduction can restore visibility, but buyers may then question why the home has remained available or assume there is room for another concession.

Condition matters more under the same logic. A buyer facing a larger monthly payment may have less cash available for immediate repairs. Roof age, heating and cooling systems, insurance concerns and visible deferred maintenance can therefore influence both the offer price and the requested credits. Sellers do not need to renovate every property, but they should decide in advance whether to repair, disclose and price accordingly, or offer a narrowly defined concession.

Local conditions remain decisive. A scarce, well-priced home can still receive multiple offers even when rates rise. A property with substantial competition may struggle despite broad claims that inventory is limited. Finance of America’s national earnings should be treated as a rate signal, not as a substitute for neighborhood-level evidence.

Net proceeds depend on concessions, timing and closing certainty

Sellers should model proceeds under more than one offer scenario. Start with the purchase price, then subtract the mortgage payoff, commissions or brokerage compensation, transfer charges, agreed repairs, buyer credits and other closing expenses. A higher offer can produce a lower net if it requires substantial concessions or carries a greater chance of returning to market.

Requests for seller-paid closing costs or temporary rate buydowns may become more common when buyers are payment-constrained. Such concessions are not automatically bad. If a defined credit preserves the price and helps a qualified buyer close, it can be more efficient than an open-ended repair commitment. The seller should know the dollar limit, confirm that the buyer’s loan program permits it and evaluate the net result.

Financing timelines deserve attention as well. A preapproval is stronger when the lender has reviewed income, assets and credit rather than relying on a preliminary conversation. Sellers and their agents can also ask whether the buyer has locked a rate, what conditions remain and how much room exists if the appraisal or insurance cost changes. Those questions do not guarantee a closing, but they can expose weak points before the contract is accepted.

Finance of America said it has adjusted product pricing and expects margins to move back toward historical levels in the first half of 2027. That is the company’s outlook, not a promise that consumer borrowing costs will fall. Sellers planning a 2026 listing should base decisions on the financing environment and comparable inventory available now. The practical response is disciplined pricing, clear property disclosures and careful comparison of each offer’s net value and closing risk.