What Happens if Mortgage Rates Never Come Down?

There's a reason so many people are struggling to buy a home today. Not only are home prices still elevated, but mortgage rates are stuck in the 6% range for 30-year loans. And they've been stuck in that range since the latter part of 2022. In fact, at one point late last year, mortgage rates actually surged above 7%, so the 6% range is far more palatable.

What makes today's borrowing rates so frustrating is that they're notably higher than the rates mortgage applicants were privy to during the pandemic. Back then, you could sign a 30-year mortgage at around 3%.

But what if today's mortgage rates become the norm? It's a possible scenario buyers might have to grapple with, though it's also likely that rates will drop at some point in the future from where they are today.

Mortgage rates tend to fluctuate over time

Today's mortgage rates might seem extraordinarily high. But actually, they're a bargain compared to the rates borrowers were looking at in the early 1980s. Back then, it was common to have to borrow at 13%, 15%, or more.

Meanwhile, the rates we're seeing today are comparable to the rates borrowers were looking at back in the period of 2002 to 2007. Once the 2008 housing crisis hit, the cost of borrowing for a mortgage dropped, and it stayed fairly low for many years before utterly plummeting during the earlier stages of the COVID-19 pandemic. So while today's mortgage rates might seem high in the context of both pandemic-era rates and post-housing crisis rates, the reality is that historically speaking, they're not so outrageous.

Some real estate experts, in fact, think that today's borrowing rates will actually become the norm. And that might force some would-be buyers to have to sit out the market until home prices come down. It might also prompt buyers to re-run their numbers and opt for homes at a lower price point.

Will mortgage rates get stuck in today's range?

Mortgage rates often respond to supply and demand. During periods when lenders need to drum up demand, they tend to lower their rates. That's why we've seen lower rates during times of crisis, like the years following the 2008 housing market collapse and the pandemic.

In time, we could see mortgage rates drop to more affordable levels than where they are today. Unfortunately, that might happen in the wake of another financial crisis, but it's the reality of the lending market.

But will we ever see 30-year mortgage rates in the 3% range again? Possibly not. The pandemic was a really extreme health and financial crisis, and it's really hard to know if we'll face a comparable event in our lifetime.

However, it's possible that rates will drop into the 5% range in the not-so-distant future, and that at least offers some relief compared to where rates are sitting today. Ultimately, though, buyers may need to accept the fact that record-low mortgage rates were a limited-time offer they may have missed out on -- and find ways to become homeowners regardless.