{"id":18368,"date":"2026-08-25T11:57:57","date_gmt":"2026-08-25T18:57:57","guid":{"rendered":"https:\/\/www.wealthfront.com/blog\/?p=18368"},"modified":"2026-08-25T11:58:00","modified_gmt":"2026-08-25T18:58:00","slug":"lower-mortgage-rates-why-not-to-wait","status":"publish","type":"post","link":"https:\/\/www.wealthfront.com/blog\/lower-mortgage-rates-why-not-to-wait\/","title":{"rendered":"Should You Wait Around for a Lower Mortgage Rate?"},"content":{"rendered":"\n

Much of the news in housing right now is about rates hitting their highest point in a year<\/a>, making some potential homebuyers wonder if they should hold off until rates go down. But the headlines\u2014and recent history\u2014might be giving some people a misleading impression of what a \u201cnormal\u201d rate is.\u00a0<\/p>\n\n\n\n

The typical person currently considering their first home purchase has spent much of their adult life in an environment of unusually low interest rates. According to recent studies<\/a>, the average first-time homebuyer in the US was about 32 years old in 2025, meaning they entered adulthood around 2011. To them, a rate of 6.5% or above for a 30-year home mortgage\u2014which is the neighborhood we\u2019re in right now<\/a>\u2014sounds really high. <\/p>\n\n\n\n

Unfortunately, buyers waiting for Covid-era rates might be waiting for a long time. As long-lived as it was, that low-rate environment was the exception, not the norm. This post will explain why mortgage rates were so low for so long, why you shouldn\u2019t expect them to return to those levels, and why you may not really want them to.<\/p>\n\n\n\n

The recent low rate era was the exception, not the rule<\/h2>\n\n\n\n

First let\u2019s look at some data. The chart below shows the average rate for a 30-year fixed-rate mortgage in the US, from April 1971 to August 2026. The latest value of 6.67% is the 37th percentile\u2014meaning that in this data set, rates were higher than they are today 63% of the time. The average rate over this period was 7.68%\u2014a full percentage point higher than the current value. Compared to this history, mortgage rates are actually lower<\/em> than average.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

So why were mortgage rates so low for most of the last two decades? The causes were two global emergencies. First came the 2008 Global Financial Crisis. With lending freezing up and the collapse of the entire global financial system potentially at hand, the Federal Reserve rapidly cut its target \u201cfederal funds rate\u201d (the rate at which banks borrow from each other overnight, which influences the rates consumers pay) from 5.25% in September 2007 down to a range of 0 to 0.25% in December 2008. It stayed that low for more than seven years. (Mortgage rates tend to be more closely tied to the yield of 10-year Treasuries than the short-term rate, but all three generally move together.)<\/p>\n\n\n\n

Hikes followed, with the midpoint of the Fed\u2019s target range rate peaking at 2.37% beginning in December 2018, before declining gradually from the summer of 2019 into early 2020. Then the next emergency arrived, and in response to the onset of the Covid-19 pandemic, the Fed cut its target range back down to near zero, where it stayed until March 2022. At that point, in response to elevated inflation, the Fed started raising rates rapidly, and mortgage rates followed suit. At this point both the Fed rate and the mortgage rate have come down from their peaks, but remain significantly above their troughs. <\/p>\n\n\n\n

To sum up so far: mortgage rates are higher now than they were for a while, but are well within their long-term historical range. The long stretch of low rates was driven by two global crises, which we shouldn\u2019t expect to repeat. In fact, we should probably hope they don\u2019t. Global crises are not typically the most enjoyable circumstances\u2014and tend to be associated with widespread job losses, which is not something that most people want to be worrying about when they are preparing to buy a home.<\/p>\n\n\n\n

The current outlook is \u201chigher for longer,\u201d which is not entirely a bad thing<\/h2>\n\n\n\n

Now, what about looking forward? Unfortunately, mortgage rates could very well get higher before they get any lower. The Federal Reserve board\u2019s \u201cdual mandate\u201d is to fight both inflation and unemployment\u2014and new chair Kevin Warsh said at its June 2026 meeting that his current focus is on inflation. Specifically, he said he wants to break the inflation surge seen so far in 2026 before consumers and businesses begin to assume that prices are going to keep rising at this pace indefinitely.<\/p>\n\n\n\n

At the same meeting, Warsh barely mentioned employment, apart from stating that it was in decent shape. The unemployment rate has been steady for the last 12 months, and forecasts have it remaining steady or falling very slightly through 2028<\/a>. This has translated into higher-than-expected retail sales and US GDP\u2014both of which are inflationary and more likely to lead to higher rates than lower ones. With solid employment, healthy growth, and persistent inflation, it\u2019s unlikely that we see rate cuts anytime soon (barring any new global crises).<\/p>\n\n\n\n

Interest rates aren\u2019t the only thing that might be different if you wait<\/h2>\n\n\n\n

As a thought experiment, let\u2019s imagine that mortgage rates suddenly do<\/em> decrease meaningfully. One thing that would mean is that the home-seekers who had been waiting for a drop will start shopping. This increase in demand, without any corresponding increase in supply, would lead to higher home prices. It\u2019s tough to say exactly how much prices would rise, but we can look back to the Covid crisis for guidance: From March 2020 to March 2021, with mortgage rates in the neighborhood of 3% or lower<\/a>, the Federal Housing Finance Agency’s nationwide purchase price index<\/a> increased by just over 14%. And a year after that<\/em>, the index was almost 35% higher than it had been in March 2020. <\/p>\n\n\n\n

For our example, though, we\u2019ll assume our hypothetical reduction in the mortgage rate triggers a relatively modest 10% increase in purchase prices. Here are our other hypothetical details:<\/p>\n\n\n\n