Buyers will cut back on their lifestyle before they’ll cut back on the house. Cotality’s Q2 2026 Consumer Sentiment Report found 69% of buyers would trim lifestyle spending to afford a home, compared with 59% who’d buy a less expensive or smaller one.
The survey covered buyers who purchased in the past five years, as well as future buyers who plan to buy within two years. Respondents came from the U.S., Canada, the UK, Australia and New Zealand.
Cotality’s report ranks the trade-offs buyers will make and breaks them down by generation.
It also tracks where households stop bending, and the mortgage payment turns out to be the line they hold longest.
The Trade-Offs Buyers Make First
Cotality asked buyers what they’ve done, or would do, to keep up with the rising cost of owning a home. Here’s the share of buyers across all five markets who said yes to each trade-off:
- Cut lifestyle spending: 69%
- Put the home search on hold: 69%
- Take a smaller mortgage to lower monthly payments: 65%
- Look for a less expensive or smaller home: 59%
- Take a “no-cost” or smaller refinance to reduce debt: 57%
- Put a refinance on hold: 51%
The report describes the pattern as a ladder. Buyers give up lifestyle and time before anything else. The structure of the loan comes next, and the size of the house comes last. In other words, buyers protect the home and make their cuts around it.
Some buyers are changing where they look to buy. Here’s how many moved for affordability:
- 28% of recent buyers moved to a different area to find more affordable housing
- 17% of those movers crossed into a different state, territory, region, county or similar market
Smaller down payments are part of the picture. The report says buyers are taking on mortgage insurance and a higher overall price tag so they can hold on to more cash. Recent buyers in Australia and the UK told Cotality they kept a bigger emergency fund for surprise expenses and home repairs.
U.S. buyers fall in the middle on every measure. They’re more willing to bend than UK buyers and a little less willing than buyers in Australia and New Zealand.
How Each Generation Bends
When you break the data down by age, one pattern holds in every market. The younger the buyer, the more they’re willing to give up.
Gen Z leads on every trade-off in the survey:
- 82% would put the home search on hold
- 82% would take a smaller mortgage
- 78% would cut lifestyle spending
- 74% would look at smaller homes
For Gen Z, hitting a specific interest rate is the top reason to start applying for a mortgage. The report says they’re more likely to be moved by a rate than by a life event like a new baby or a job offer in another city.
Younger buyers kept buying when rates climbed. In 2022, when rates started to rise, participation from buyers under 25 dropped close to 10 percentage points less than it did for other age groups.
Millennials come in above the all-buyer average on every trade-off. The report lists their numbers as the difference from the all-buyer figure:
- Cut lifestyle spending: 8 percentage points higher
- Take a smaller mortgage: 8 percentage points higher
- Put the home search on hold: 5 percentage points higher
- Look at smaller homes: 5 percentage points higher
What Millennials are doing matches what they told Cotality. They take out more loans than any other generation in the U.S., and lenders wrote 3.1% more Millennial loans in 2025 than in 2023. Rates opened 2025 at 6.9%, compared with 6.5% at the start of 2023.
Cotality Chief Economist Selma Hepp says waiting for a lower rate has its own price.
“It’s expensive to buy a home. But so is renting.”
Hepp explains that over the long run, homeowners come out ahead, and she says limited experience with higher rates can skew what younger buyers expect.
“Older generations know this. Millennial buyers, who are the largest cohort of homebuyers, have not experienced a sustained higher-rate environment, which can distort their expectations. Ultimately, it comes down to limited experience—but that lack of experience can be costly.”
Gen X falls between the younger and older groups:
- 69% would cut lifestyle spending
- 62% would take a smaller mortgage or pause the search
- 57% would buy a smaller home
The report describes Gen X as being at their peak earning years and their peak financial obligations at the same time. One Gen X future buyer in the U.S. told Cotality they’re working extra hours so they can put more down and borrow less.
Baby Boomers are the least willing to bend on every measure in the survey:
- 50% would cut lifestyle spending
- 43% would buy a smaller home
- 41% would take a smaller mortgage
A meaningful share of Boomers aren’t borrowing the way younger buyers are. Many are downsizing or paying more in cash, using money from the sale of their last home.
Having lived through earlier rate cycles, they’ll wait for better terms before they compromise.
Where the Bending Stops
There’s a limit to all this bending, and the report says the mortgage payment is the last thing buyer households are willing to budge on.
Households can spend months cutting back and using up savings before they fall 90 days behind on a mortgage. With U.S. credit card balances at their highest level in 15 years, a borrower who falls behind may have spent months absorbing pressure in other parts of the budget.
Hepp explained it this way:
“Distressed borrowers follow a default hierarchy, and losing the roof over your head is the last thing to happen because of its practical and emotional value. Borrowers will run up credit balances, tap home equity if possible, and deplete other cash reserves entirely before they accept missing a mortgage payment, signaling the final breaking point.”
Cotality’s mortgage performance data shows where this strain is starting to register in the U.S.
Serious delinquency, meaning a loan is 90 days or more past due, rose in a majority of states over the year. The increases in those states were mostly under half a percentage point.
FHA loans in Florida and Arizona stand out. FHA loans help many first-time and lower-income buyers purchase with smaller down payments, which can leave some borrowers with thin savings when a pay cut or a surprise repair hits.
Here’s how FHA serious delinquency changed between August 2025 and March 2026:
- Florida: from 4.3% to 6.36%, a relative increase of close to 48%
- Arizona: from 3.21% to 5.42%, a relative increase of close to 69%
Other loan types held steady or improved. Conventional mortgage delinquency changed little over the past year, and VA loan delinquency fell in close to every state.
Praveen Chandramohan, SVP of Mortgage Data Solutions at Cotality, says when lenders spot this trouble makes a big difference.
“Rising FHA delinquency is the signal lenders can’t afford to read late. By the time a loan reaches the 90-day bucket, the borrower is already in distress and the options are narrower and more expensive than they were three months earlier. The portfolios we see performing best are run by lenders treating early-stage stress indicators as the trigger for outreach, rather than waiting for the formal delinquency markers to tell them what their borrowers already know.”
Some buyers are near the end of what they can give up before they even get a mortgage. Close to 1 in 3 buyers in Australia and New Zealand aren’t sure they can afford the up-front costs of buying at all.
What the Sacrifice Ladder Signals Next
Cotality says buyers in all five markets climb the same ladder, in this order:
- Cut the life around the home
- Reduce the debt
- Shrink the property
- Redraw the search area
The report says buyers have done the math and know their limits (especially when it comes to that monthly payment), and the industry can use those numbers.
Hepp says the survey answers match what Cotality sees in its own payment data.
“Reading the survey data alongside our quantitative data reinforces what the market is saying. The 69% who say they will cut lifestyle are the same households we see compressing discretionary spend in our payment data. Lenders working with both lenses can see a stress signal forming months before it shows up in arrears, which is when intervention is still cheap and the borrower relationship is still intact.”
