Will mortgage rates ever go down again? This is one of the biggest questions in the housing market conversation right now, and it’s one of the main points that’s been keeping buyers on the sidelines.
Because if you experienced the market even just a few years ago, today’s conditions feel totally different. On this episode of Investing in Real Estate, we’re going to break this down, look at the data points, and most importantly, what to focus on moving forward. Click play to learn more!
In this episode you’ll learn:
- What happened with interest rates during the pandemic.
- The history of mortgage interest rates.
- What experts are predicting for the future of mortgage rates.
What Happened with Interest Rates During the Pandemic
Back in 2019, just one year before the pandemic, mortgage interest rates were at a historical low of 3.94. Then two years later, rates fell even further to a new all-time low of 2.65%. In general, rates hovered around the three percent range for a couple years. It feels like a world away.
When you compare today’s mortgage rates, which are sitting under 6%, it feels like a big jump – and this explains why there is so much hesitancy among buyers and sellers alike in today’s housing market. Rates in the 3% range feel like they are normal to some people, especially if you bought a home or investment property in that time frame. But historically, 3% rates are an outlier.
Those rates we saw during the pandemic era were artificially low. In 2021, the Federal Reserve cut interest rates in response to the pandemic, making it cheaper for Americans to borrow money.
The History of Mortgage Interest Rates
Freddie Mac data tracks back to 1971, and the long-term average is 7.7% for a 30-year fixed rate mortgage. The highest annual average rate ever recorded was 16.63% in 1981. So if you take all of these data points into context, it’s not like mortgage rates are outrageous right now. Sure, they may feel high if you’re comparing them to the pandemic era, but they’re not actually that high, historically speaking.
So while it feels like interest rates doubled overnight, technically they didn’t. Those ultra-low rates were just a response to a very specific, once-in-a generation event. So unless we see another major global crisis that forces a similar economic reaction, rates will probably never be that low again.
What Experts Are Predicting for the Future of Mortgage Rates
The National Association of Home Builders are predicting an average rate of 6.2% throughout 2026 and 6.3% in 2027. The National Association of Realtors says that due to the high levels of national debt, mortgage rates cannot go down to even 5%. That’s another important point – factors like inflation and national debt are playing a role at keeping rates pretty steady right now.
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