27th September 2026
America's housing market is beginning to show some warning signs.
This does not mean another 2008 financial crisis is developing. The US mortgage market is better regulated than it was before the financial crash, and millions of American homeowners have substantial equity in their homes.
But housing has become increasingly difficult to afford, mortgage rates remain high and some borrowers are beginning to fall behind with their payments.
That raises a question which is also relevant in Britain:
What happens when houses become so expensive that people can only afford them by taking on increasingly large mortgages?
Some cracks are appearing
The US Mortgage Bankers Association reported that the overall mortgage delinquency rate was 4.37% in the second quarter of 2026.
That was actually slightly lower than the previous quarter, but it was 0.44 percentage points higher than a year earlier.
More significantly, the proportion of mortgages seriously delinquent, meaning at least 90 days behind or in foreclosure, increased for the fourth consecutive quarter. The seriously delinquent rate reached 2.06%, up 0.49 percentage points over the year.
The deterioration has been particularly noticeable among FHA mortgages, which are widely used by lower-income and first-time buyers. (MBA)
These figures do not mean that America is experiencing a mortgage crisis. Overall delinquencies actually fell slightly during the quarter.
They do suggest, however, that financial pressure is becoming more visible among some groups of homeowners.
The cost of borrowing
One reason is straightforward.
US mortgage rates remain much higher than during the pandemic.
That creates an unusual situation because millions of existing homeowners locked in very low fixed-rate mortgages when borrowing costs were at historic lows.
Someone who bought a house in 2021 might still have a mortgage at around 3%. Someone wanting to buy the same house today could face a rate more than twice as high.
Existing homeowners therefore have little financial incentive to sell and give up their cheap mortgage, while potential buyers face high prices and expensive borrowing.
This creates a two-tier housing market.
The affordability trap
This brings us back to a problem governments around the world are wrestling with.
If people cannot afford the deposit for a house, governments can help them with the deposit.
But if the underlying problem is that there are simply not enough houses at prices ordinary households can afford, increasing buyers' purchasing power can have an unintended consequence.
If housing supply responds quickly, more homes get built.
If supply responds slowly, some of the additional purchasing power can instead be reflected in higher house prices.
That is one of the lessons emerging from Britain's experience with Help to Buy.
Britain's own experience
The UK Government has recently published an independent evaluation of England's Help to Buy scheme, which ran from 2013 to 2023.
It found that the scheme did increase housing supply. Around 15% of new-build homes constructed during the period were estimated to be attributable to Help to Buy.
But the evaluation also found evidence that Help to Buy contributed to higher house prices.
Its analysis estimated that average house prices were around 2% higher than they would otherwise have been, with the effect particularly noticeable in areas which were already relatively unaffordable. (GOV.UK)
This illustrates the difficulty governments face.
A policy can help some people buy their first home while simultaneously making the housing market slightly more expensive for people who come along afterwards.
The new Help to Buy
That makes the new English Your First Home scheme particularly interesting.
The scheme is intended to help first-time buyers purchase new-build homes with a deposit of only 2.5%, alongside a government equity loan.
The intention is straightforward: help people who can afford the monthly payments but cannot accumulate a sufficiently large deposit.
That may genuinely help some households.
But the experience of the previous scheme raises a bigger question.
How much should governments concentrate on helping people buy homes, and how much should they concentrate on making sure enough homes are built?
There is no simple answer.
A housebuilding programme takes years, while a deposit-support scheme can help someone buy almost immediately.
But housing is unusual because helping one generation into the market can affect the price paid by the next.
This is not 2008
It is important not to exaggerate what is happening in America.
The US mortgage market today is not the same as it was before the financial crisis. Lending standards are different, homeowners generally have more equity and the financial system is not built around the same volume of risky mortgages.
The latest figures also show that overall mortgage delinquencies actually fell slightly in the second quarter.
So this is not evidence that America is heading for another 2008.
It is evidence of something more straightforward but still important.
Housing affordability has become a problem large enough to start showing up in household finances.
What does it mean for Britain?
The US experience is worth watching because Britain faces some of the same pressures.
First-time buyers struggle to save deposits. Housebuilders face planning, land and construction costs, while governments want policies which produce visible results.
But there is a danger in concentrating too much on the buyer and not enough on the supply of homes.
If more people are given the ability to bid for a limited number of houses, the result may be more transactions without making housing fundamentally more affordable.
The alternative is less exciting politically but potentially more important economically.
Build enough houses.
That is particularly relevant in rural areas such as Caithness, where the problem is not simply the national average house price but the availability of suitable homes in the right places and at prices local incomes can support.
The American mortgage market therefore offers a warning, but not necessarily that another financial crash is imminent.
The warning is that when housing becomes too expensive, eventually the mathematics catches up with households.
And once the monthly mortgage payment becomes the problem, helping people find the deposit is only part of the solution.