Will Mortgage Rates Ever Be 3% Again? (2024)

Many people who are looking to buy a home in the US are wondering if they will ever see mortgage rates as low as 3% again. After all, just a year ago, the average 30-year fixed-rate mortgage was around 3.1%, according to Freddie Mac. That was a historic low that made homeownership more affordable for millions of Americans.

But since then, mortgage rates have been steadily rising. Mortgage reached 7.83% on October 11, 2023. That's the highest level since 2000, and it has a significant impact on the monthly payments and the total cost of borrowing for homebuyers.

So what are the chances that mortgage rates will drop back to 3% in the near future? Unfortunately, not very high, according to most experts.

The main reason why mortgage rates are so high right now is inflation. Inflation is the general increase in the prices of goods and services over time, and it reduces the purchasing power of money. When inflation is high, lenders demand higher interest rates to compensate for the loss of value of their money over time.

Inflation has been surging in the US since the start of the pandemic, due to several factors, such as supply chain disruptions, labor shortages, pent-up demand, and massive government stimulus. The Consumer Price Index (CPI), which measures the changes in the prices of a basket of consumer goods and services, rose by 6.2% in September 2023 from a year ago, the highest annual increase since 1990.

Fed's Role in Mortgage Rates

The Federal Reserve, which is the central bank of the US, has the dual mandate of maintaining price stability and maximum employment. To fight inflation, the Fed can raise its key interest rate, known as the federal funds rate, which influences other short-term interest rates in the economy. By making borrowing more expensive, the Fed can slow down economic activity and reduce inflationary pressures.

The Fed has already signaled that it will start raising its interest rate in 2024, sooner than previously expected. The Fed also announced that it will begin tapering its bond-buying program, known as quantitative easing (QE), which has been injecting trillions of dollars into the financial system since March 2020 to support the economy during the pandemic. By reducing its bond purchases, the Fed will reduce the supply of money in the market and put upward pressure on long-term interest rates, such as mortgage rates.

Therefore, unless inflation slows down significantly in the coming months, it is unlikely that mortgage rates will fall back to 3% anytime soon. In fact, some experts predict that mortgage rates could reach 10% by 2025.

Expert Opinions

Lawrence Yun, chief economist at the National Association of Realtors (NAR), says that “returning to mortgage rates of 3% or 4% is not going to happen, in my view. He points out that historically rates have been higher than that, and that “the short-lived era of 3% interest rates for 30-year fixed mortgages is over.

Lisa Sturtevant, chief economist at Bright MLS, agrees that “there will be no return to the 3% rates we had during the pandemic“. She says that “while mortgage rates likely will come down some in the second half of the year, they will remain above 6% for most borrowers“.

Of course, no one can predict the future with certainty, and there are always factors that can affect mortgage rates in unexpected ways. For example, if there is a major geopolitical crisis or a new variant of COVID-19 that threatens global health and stability, investors may flock to safe-haven assets such as US Treasury bonds, which would lower their yields and consequently lower mortgage rates.

But barring any major shocks to the system, most analysts agree that mortgage rates are unlikely to return to 3% in the foreseeable future. Therefore, homebuyers who are waiting for a better deal may be disappointed and miss out on other opportunities in the housing market.

In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future. This is due to a combination of factors, including:

  • Higher Inflation: Inflation is currently at a 40-year high in the US, and the Federal Reserve is raising interest rates to combat it. This puts upward pressure on all borrowing costs, including mortgage rates.
  • Changed Economic Landscape: The global economy has changed significantly since the last time mortgage rates were at 3%, in 2020. There are now greater geopolitical tensions, supply chain disruptions, and a looming recession. These factors make it less likely that interest rates will fall back to such low levels.
  • Shifting Investor Expectations: Investors have become accustomed to higher interest rates and may not be willing to lend money at such low rates as they were in the past. This could keep mortgage rates above 3% even if inflation and other factors were to moderate.

However, it is important to remember that the future is uncertain. If inflation falls significantly and the economy enters a deep recession, it is possible that mortgage rates could fall back to 3%. However, this scenario is considered unlikely by most economists.

I hope this information is helpful!

Will Mortgage Rates Ever Be 3% Again? (2024)


Will Mortgage Rates Ever Be 3% Again? ›

In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future.

Will interest rates ever go back down to 3? ›

It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.

What will mortgage rates be in 2024? ›

Mortgage giant Fannie Mae likewise raised its outlook, now expecting 30-year mortgage rates to be at 6.4 percent by the end of 2024, compared to an earlier forecast of 5.8 percent.

How low will mortgage rates go in 2025? ›

Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."

What is the interest rate forecast for the next 5 years? ›

Projected Interest Rates in the Next Five Years

ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.

What will mortgage rates be in 2025? ›

The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.

How low will mortgage rates go in 2024? ›

That means the mortgage rates will likely be in the 6% to 7% range for most of the year.” Mortgage Bankers Association (MBA). MBA's baseline forecast is for the 30-year fixed-rate mortgage to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.

What will mortgage interest rates be in 2026? ›

The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.

Where will mortgage rates be in 10 years? ›

According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to range from 7.40% to 7.86%, with an average of 7.63%. They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.

What is the average 30-year fixed rate today? ›

Current mortgage and refinance interest rates
ProductInterest RateAPR
30-Year Fixed Rate6.99%7.04%
20-Year Fixed Rate6.74%6.79%
15-Year Fixed Rate6.42%6.50%
10-Year Fixed Rate6.28%6.36%
5 more rows

Will mortgage rates ever drop below 5 again? ›

Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.

What will the 30-year mortgage rates be in 2025? ›

The latest forecast from the National Association of Home Builders puts interest rates at 6.89% to finish 2023 in its October predictions. The organization says that the 30-year fixed rate will be 6.79% in 2024 and 5.72% in 2025.

Do mortgage rates go down in a recession? ›

For people looking to buy a home, a recession can bring some advantages. When the economy is not doing well, home prices often drop, which can be good news for those who want to find a good deal; plus, during recessions, mortgage rates usually stay low, meaning buyers can get a home with lower monthly payments.

How high could interest rates go in 2025? ›

Current Situation. The Fed is currently raising interest rates to counteract inflation. The policymakers expect rates to stay above 5% in 2024 and around 4% by the end of 2025.

Are mortgage rates expected to drop again? ›

Instead, we'll probably see some gradual 25-basis-point cuts here and there. If that happens, rates could fall to closer to 6% by the end of 2024. Channel expects rates to remain high compared to the levels seen during the height of the coronavirus pandemic, when average 30-year mortgage rates were around 2.65%.

Should I fix my mortgage at the moment? ›

If you are worried about how high your monthly mortgage payments could rise in the future, then fixing your mortgage rate remains a sensible choice. It means that it is important to shop around to find the best fixed-rate mortage deal as rates could remain elevated for some time.

Will interest rates ever be low again? ›

Current mortgage interest rate trends

The average 15-year fixed mortgage rate similarly fell, going from 6.21% to 6.11%. After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023. Many experts and industry authorities believe they will follow a downward trajectory into 2024.

When was the last time interest rates were at 3%? ›

The lowest interest rate for a mortgage in history came in 2020 and 2021. In response to the COVID-19 pandemic and subsequent lockdowns, the 30-year fixed rate dropped under 3% for the first time since 1971, when Freddie Mac first began surveying mortgage lenders.

When was the last time interest rates were 3? ›

Average 30-year fixed rate mortgage in the U.S.

That's because average 30-year fixed mortgage rates of 3% or less were an anomaly related to the pandemic, lasting from about July 2020 to Nov. 2022. Historically, the rates have been closer to an average of 7% over the past 50 years, according to Freddie Mac data.

Will car interest rates go down in 2024? ›

While market predictions are bullish on the funds rate — and by extension, auto loan rates — finally coming back down in 2024, it's still not a guarantee. Powell and others at the Fed remain committed to their target of 2% inflation.

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