In a move that reflects the ongoing strength of the American property market, the US Federal Housing Finance Agency (FHFA) has announced a significant increase to the maximum size of home loans it will guarantee.
Higher Loan Limits for 2026
Starting next year, the government-sponsored enterprises Fannie Mae and Freddie Mac will be permitted to acquire single-family home loans of up to $832,750 across most of the United States. This new conforming loan limit marks a 3.3% increase from the 2025 level, the agency confirmed on Tuesday 25 November 2025.
The FHFA, which oversees these mortgage giants, adjusts the loan limit annually to keep pace with changes in national house prices. This year's decision was informed by data from the FHFA’s House Price Index, which showed that, on average, US home prices increased by 3.3% in the third quarter (July-September) compared to the same period a year earlier.
Understanding Conforming and Jumbo Loans
Fannie Mae and Freddie Mac play a crucial role in the US housing finance system. They purchase mortgages from lenders, bundle them into securities, and sell them to investors, all while providing a guarantee against default. However, they are only authorised to buy loans that fall within the FHFA's set limit, known as conforming loans.
Mortgages that exceed this ceiling are classified as jumbo loans and typically come with stricter lending criteria and higher interest rates for borrowers. By raising the conforming loan limit, the FHFA effectively allows more homebuyers to access the more favourable terms associated with these government-backed loans.
Market Context and Regional Variations
This policy change comes against a complex backdrop for the US housing market. Since 2022, the market has been in a slump, driven by mortgage rates climbing from historic lows. Sales of previously occupied homes plummeted last year to their lowest level in nearly three decades.
Activity has remained sluggish through much of 2025, even after a slight boost this autumn when the average rate on a 30-year mortgage fell to its lowest point in over a year.
It is important to note that the $832,750 limit applies to the majority of the country, but the FHFA permits higher thresholds in specific areas. In states with high construction costs, like Alaska and Hawaii, and in any county where the local median home value is more than double the baseline limit, a higher ceiling applies.
For example, starting in 2026, the conforming loan limit for single-family homes in high-cost areas such as Los Angeles and New York counties will be $1,249,125.
This annual adjustment is a key mechanism for ensuring the US mortgage market remains responsive to economic realities, providing a potential lifeline for buyers in an otherwise challenging environment.
