If you’re in the market for a home, it’s understandable to wonder when mortgage rates will go down. While interest rates might not fall all the way to 3% again, what about 4%? Even before the COVID-19 pandemic, rates lingered at or below 4%.
Average interest rates for a 30-year fixed-rate mortgage have hovered above 6.5% this year, even after the Federal Reserve cut rates three times at the end of 2024.
While you should consider other factors, such as your financial situation, when deciding the best time to purchase a home, securing a lower interest rate can lead to significant savings.
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Interest rates on 15- and 30-year fixed-rate mortgages are not likely to return to 4% anytime soon.
“I expect mortgage rates to gradually fluctuate over the next five years as inflation comes under control and the Federal Reserve eases its policy,” said Stephen Clyde, Realtor and CEO of Stephen Clyde Real Estate Group, via email. “However, we’re likely to see slow movement, not sharp drops, staying within a range of approximately 5.375% to 6.40%.”
Mortgage rates are closely tied to the 10-year Treasury yield. Lenders set rates partly based on the yield to make mortgage-backed securities (MBSs) attractive to investors. If the bond yield remains elevated, so do mortgage rates.
Rates on a 30-year fixed mortgage reached 3.35% in May 2013, the lowest rates in history (at the time). These lows were brought on by the years-long response to the 2007 financial crisis when millions of U.S. homeowners faced foreclosures on their houses (many of which had subprime mortgage loans), and financial institutions collapsed.
In response to the crisis, the Federal Reserve lowered the federal funds rate to near 0%, similar to its policy during the COVID-19 pandemic. It also purchased large amounts of Treasury bonds and mortgage-backed securities, which encouraged lending and made borrowing cheaper.
The significantly reduced rates of 2010 and, more recently, 2020 were driven by major economic downturns. It’ll likely take similar seismic events to see rates drop that far again.
“Returning to a 4% mortgage rate would likely require a deep recession, a sharp rise in unemployment, and more aggressive monetary stimulus,” noted Charles Goodwin, head of bridge and DSCR lending at Kiavi, via email. “The recession would need to be more severe than most forecasters’ current base case.”
Dig deeper: When will mortgage rates go down? A look at 2025 rate predictions.
When deciding the right time to buy a home, it’s best to focus on your financial situation. Broader economic trends are difficult to predict and rely on several intertwining factors, but you have some level of control over your own finances.
“Trying to time the market rarely works in real estate,” mentioned Clyde. “Over the past 75 years, U.S. home prices have only declined seven times. Plus, there are several advantages to buying now, like less competition and more room to negotiate on prices, repairs, and closing costs.”
If you’re ready to buy now, you may have the option to refinance in the future if rates drop. You can also consider an adjustable-rate mortgage (ARM) or seller-paid buydown to keep your rate low.
Rates on ARMs can be lower than fixed mortgage rates, at least initially. However, your interest rate can fluctuate periodically based on economic conditions, so you could get stuck with a higher rate later.
With a seller-paid buydown, the seller pays money to lower the buyer’s rate. It’s usually a temporary rate buydown, but it can be for the life of the loan if the seller pays for discount points at closing.
Regardless of your loan type, make sure you can afford the monthly mortgage payment. In addition to principal and interest, your payment can include homeowners’ insurance, property taxes, and private mortgage insurance, if required.
Mortgage interest rates rose significantly in 2022 as the Federal Reserve responded to inflation. After setting the federal funds rate near 0% in the height of the pandemic, the Fed raised rates 11 times in 2022 and 2023 in an effort to slow down the economy. Raising the federal funds rate made borrowing more expensive, which impacted consumer borrowing on products like auto and home loans.
The lower the mortgage rate, the better, since you’ll pay less interest over the life of the loan. Average 30-year fixed mortgage rates have remained above 6.5% in 2025. However, your personalized rate will be based on your credit score, debt, and income. You’ll also find different interest rates depending on the type of loan. A 15-year fixed mortgage rate is usually lower than that on a 30-year fixed-rate mortgage. Adjustable-rate mortgage rates can be lower than fixed rates, at least initially.
Interest rates are difficult to predict, especially further out. You’ll be hard pressed to find expert predictions extending past 2027. However, some experts anticipate future Federal Reserve rate cuts, so they expect a gradual decline in interest rates. These predictions can change depending on U.S. and global economic conditions and the central bank’s response.
Laura Grace Tarpley edited this article.
