Buyers Beware: Mortgage Rates Likely to Hit 8%-10% by 2025

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.


  • Some experts expect that 30-year fixed-rate mortgages will have interest rates of 8% or more by next year.
  • If this happens, it could make homeownership even less affordable.

Homeownership is already expensive… could it get worse?

The average interest rate on a 30-year fixed-rate mortgage loan is 5.74% as of late July, up sharply from 3.01% a year ago. And while this has certainly made homeownership far less affordable for buyers who don't have the ability to buy a home in cash, it's also important to realize that this isn't terribly high from a historical perspective.

I'm not just talking about the inflationary period of the late 1970s and early 1980s. The 30-year mortgage rate was above 7% for most of the 1990s and didn't fall below 5% for the first time ever until after the 2008 housing market meltdown. The takeaway? Don't think mortgage rates can't get even higher.

In fact, some experts are projecting that that's exactly what is going to happen. Here's a look at where mortgage rates could be going, and what it could mean to home buyers.

Could mortgage rates really exceed 8%?

Of course, nobody has a crystal ball that can predict future rates from mortgage lenders. After all, just a few years ago, most experts never thought we'd see sub-3% rates on 30-year loans, and that's exactly what happened in 2021.

So, take it with a grain of salt, but many experts see mortgage rates getting much higher before they get better. In fact, a recent New York Federal Reserve housing survey found that 30-year mortgage rates are expected to rise to 6.7% before 2023 and to 8.2% by 2025. And some experts predict it's going to go even higher.

What would this mean for home buyers?

The short answer is that these mortgage rates would make buying a home less affordable for millions of people. To show just how unaffordable it could get, here's what the monthly principal and interest payment would be on a $400,000 mortgage at various interest rates.

Mortgage Interest Rate Monthly Payment on $400,000 Loan
5% $2,147
6% $2,398
7% $2,661
8% $2,935
9% $3,218
10% $3,510
Data source: Author's calculations.

Keep in mind that this is just the principal and interest portion of the mortgage payment. It doesn't include the costs of property taxes or insurance, which most borrowers are required to pay along with their monthly mortgage payment.

Would home prices decline?

Another common prediction among experts is that rising mortgage rates will cause home prices to decline, but the historical precedent suggests otherwise. Here are a few past scenarios:

  • 30-year mortgage rates increased from about 7.2% at the beginning of 1994 to 9.2% at the end of that year. Home prices increased by 2.5% that year, in line with historical averages.
  • From January 1999 through July 2000, 30-year mortgage rates rose from about 6.8% to 8.1%. Home prices in the U.S. increased by 12.6%.
  • More recently, 30-year mortgage rates increased from roughly 3.4% in mid-2016 to 4.55% at the end of 2018. You guessed it -- home prices increased by 14% in that period.

The point is that there is no historical precedent suggesting rising mortgage rates alone will cause home prices to decline. In fact, the only time in modern history that home prices significantly declined was after the mortgage bubble burst in 2008, and 30-year mortgage rates steadily declined throughout the home price slump. Now, it's entirely possible that this time will be different, but a massive drop in home prices may not be as certain as you think.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow