Home prices are at a record high. Overpaying for your mortgage compounds the pain

U.S. home prices hit a new record in June, according to the latest data from the National Association of Realtors. That affordability hurdle means shopping for a mortgage rate is more important than ever. Unfortunately, new Bankrate research shows there are systemic challenges that prevent consumers from getting the best deal.

Few buyers bargain effectively, a reality that results in a steep Hidden Homeownership Tax, according to the new research by Bankrate. In 2025, 87% of borrowers purchased a more expensive mortgage than was available to them, costing the typical borrower $3,343 annually and $78,186 over the loan term.

The typical existing home sold in June traded for $440,600, an all-time high and up nearly 2% from the previous record, set in June 2025. The relentless rise of home prices, mortgage rates above 6.5%, and systemic interest overpayment are a major drag for American homebuyers.

While comparing mortgage offers is a wise move in any market, the recent Bankrate research shows how hunting for a better deal can represent the difference between buying vs. waiting for many people. National home prices have risen 52% from June 2020, according to NAR data. And first-time buyers feel the challenges acutely – that group made up just 33% of homebuyers in June.

Related: Where you live can affect how likely you are to overpay for a mortgage

For borrowers priced out of homeownership, a more affordable mortgage could be enough to allow them to take the first step on the equity-building ladder. That $3,343 overpayment translates to $279 a month, the research found. That’s real money – competitive pricing translates to some $47,000 in additional purchasing power.

Bankrate’s research is based on an analysis of Home Mortgage Disclosure Act data on 3.2 million mortgage originations last year, and benchmarked against Bankrate’s real-time mortgage auction, where hundreds of lenders can compete for individual borrowers’ business.

More on the hidden homeownership tax

Mortgages are complicated financial products. Even when borrowers do try to compare, they often find themselves lost in a sea of unclear choices and confusing financial and legal terms. The mortgage industry lacks the sort of transparent pricing that lets borrowers easily compare offers.

“Consumers aren’t doing it because it’s too hard,” says Michael Micheletti, chief marketing officer at Unlock Technologies, a home equity financing company. “The system today is still arranged around originators finding borrowers, and not borrowers evaluating their options.”

Getting multiple quotes gives you the most leverage to find the lowest-priced mortgage, but most borrowers take the first and only loan offer they get. Bankrate’s research finds nearly 90% of borrowers rely on recommendations from real estate agents, family or their banks. While this approach may offer convenience, it can also deprive you of the best rate the market has to offer, and which you could be entitled to based on your financial profile. 

Even the most well-intentioned mortgage loan professionals can’t be counted on to make sure you get the best rate on a mortgage, recent Bankrate watchdog reporting shows. Despite common perception, loan officers and brokers typically lack any legally mandated fiduciary duty to act in borrowers’ best interests. 

Bankrate’s research shows nearly all mortgage borrowers overpay for their mortgage, with this Hidden Homeownership Tax being imposed in small and large metros throughout the country. The average overpayment in dollars is unsurprisingly higher in expensive coastal markets, such as Los Angeles. But the spread between rates buyers ended up with and what was available to them – a more accurate relative overpayment measure – can be even higher in smaller metros such as Victoria, Texas, or Elkhart-Goshen, Indiana. All told, borrowers made some $11 billion in excess annual payments on 2025 originations alone, adding up to $247 billion over the life of those loans.

What’s driving record prices

An unusual dynamic is playing out in the U.S. housing market: The volume of home sales is muted, yet home prices keep rising. NAR reported an annualized pace of just 4.09 million home sales for the month. For context, the U.S. housing market routinely posted 5 million sales a year before the pandemic. During the pandemic housing boom, that level jumped to 6 million homes sold annually.

So how can home prices keep hitting new highs even with tepid home-buying activity? NAR Chief Economist Lawrence Yun points to inventory, or a lack thereof. There were 1.56 million homes for sale at the end of June, up 1.3% from a year ago.

“That is miniscule. We need to see 30%, 40% growth in inventory,” Yun told reporters Thursday. “We’re not seeing that.”

Housing inventory has been restrained in part because mortgage rates plunged to less than 3% during the pandemic, then jumped to today’s levels of around 6.5%. The rise in mortgage rates has created a lock-in effect – Americans don’t want to give up their super-cheap mortgages, so they’re choosing to stay in their homes rather than move.

What you can do

How to cope with the relentless rise of home prices:

Get rate quotes from at least three lenders. Many borrowers skip this step, but it’s a mistake. Mortgage interest rates vary considerably and change often. The same borrower shopping on the same day can get quotes that vary, sometimes widely. Some lenders offer rate quotes online after you enter your contact info and financial details. Others require you to hop on the phone for a conversation – and some large lenders are known for keeping consumers on the phone for a long time in an attempt to build rapport and reinforce the idea that shopping around takes too much time. When comparing these rate quotes, take into account the fees that come with the loan.

Improve your credit score. Your credit score plays a major role in determining your mortgage rate, and what type of loan you can get. Be sure to make all of your payments on time, and be careful about taking on new debt, such as an auto loan, in the months leading up to your home purchase.

Do your homework on down payment assistance. Every state in the country offers some sort of aid to first-time buyers. The typical package is worth $18,000, but the amounts can range much higher. In some cases, buyers — with the help of savvy loan officers — cobble together six-figure down payment assistance packages. Dozens of down payment programs now offer more than $100,000 in assistance. This aid requires work on your part – you’ll have to file paperwork and complete a first-time buyer class. But it can make the difference between becoming a homeowner and continuing to rent.