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Understanding Today’s Mortgage Rates: Is 3% Coming Back?

A lot of buyers are pressing pause on their plans these days, holding out hope that mortgage rates will come down – maybe even back to the historic-low 3% from a few years ago. But here’s the thing: those rates were never meant to last. They were a short-term response to a very specific moment in time. And as the market finds its footing again, it’s time to reset expectations.

Back in 2020 and 2021, 3% mortgage rates gave buyers a serious boost: more affordability, more buying power, and more opportunity. But those rates were a result of emergency economic policies during the height of a global pandemic. Now that the economy is in a different place, we’re seeing mortgage rates in the high 6% to low 7% range.

And while experts currently project a slight easing in the months ahead, most industry leaders agree: rates are not going back to 3%.

Instead, many forecasts suggest mortgage rates will settle in the mid-6% range by the end of the year, pending any major economic shifts. As Kara Ng, Senior Economist at Zillow, says:

“While Zillow expects mortgage rates to end the year near mid-6%, barring any unforeseen shocks, that path might be bumpy.”

What Buyers Should Know

Basically, waiting for 3% rates might mean waiting longer than you’d expect – and missing out along the way. Instead of putting off homebuying indefinitely, make a plan to get there and focus on what you can control: your budget, your credit, and working with a trusted professional who can explain exactly what’s happening in the current market – and how to navigate it.

Your local real estate agent and a trusted lender make all the difference in this process. The experts have insights into down payment assistance programs, alternative financing options, negotiation strategies, and overall – the experience you need on your side to understand creative ways that will make your plans work.

And here’s the biggest thing to keep in mind. Since rates are projected to ease slightly later this year, if that happens, it could bring some more buyers back into the market. Acting now gives you a head start, especially with more homes on the market than we’ve seen in years.

Think about it: if mortgage rates do come down, what do you think everyone else is going to do? That’s right – they’ll jump back in too.

Getting ahead of that rush could put you in a stronger position to find the right home with less competition. Realtor.com sums it up well:

“Staying out of the market in hopes of a rate drop that never comes can lead to missed opportunities . . . Rising home prices, rent increases, and inflation might outpace any future savings on interest. And if rates do fall sharply again, buyers could face an entirely different challenge: surging competition.”

Bottom Line

Those 3% rates everyone remembers from a few years ago were the exception, not the rule.

Now that they’re settling into new territory, it’s a good time to adjust your expectations and learn more about where things are heading as this market shifts.

A local real estate agent and a trusted lender will be your best resources, always keeping you up-to-date and informed, so you can make sense of your options and build a game plan that works for you.

Thinking about an Adjustable-Rate Mortgage? Read This First.

If you’ve been house hunting lately, you’ve probably felt the sting of today’s mortgage rates. And it’s because of those rates and rising home prices that many homebuyers are starting to explore other types of loans to make the numbers work. And one option that’s gaining popularity? Adjustable-rate mortgages (ARMs).

If you remember the crash in 2008, this may bring up some concerns. But don’t worry. Today’s ARMs aren’t the same. Here’s why.

Back then, some buyers were given loans they couldn’t afford after the rates adjusted. But now, lenders are more cautious, and they evaluate whether you could still afford the loan if your rate increases. So, don’t assume the return of ARMs means another crash. Right now, it just shows some buyers are looking for creative solutions when affordability is tough. 

You can see the recent trend in this data from the Mortgage Bankers Association (MBA). More people are opting for ARMs right now (see graph below):

a graph showing a lineAnd while ARMs aren’t right for everyone, in certain situations they do have their benefits.

How an Adjustable-Rate Mortgage Works

Here’s how Business Insider explains the main difference between a fixed-rate mortgage and an adjustable-rate mortgage:

“With a fixed-rate mortgage, your interest rate remains the same for the entire time you have the loan. This keeps your monthly payment the same for years . . . adjustable-rate mortgages work differently. You’ll start off with the same rate for a few years, but after that, your rate can change periodically. This means that if average rates have gone up, your mortgage payment will increase. If they’ve gone down, your payment will decrease.”

Of course, things like taxes or homeowner’s insurance can still have an impact on a fixed-rate loan, but the baseline of your mortgage payment doesn’t change much. Adjustable-rate mortgages don’t work the same way.

Pros and Cons of an ARM

Here’s a little more information on why some buyers are giving ARMs another look. They offer some pretty appealing upsides, like a lower initial rate. As Business Insider explains:

“Because ARM rates are typically lower than fixed mortgage rates, they can help buyers find affordability when rates are high. With a lower ARM rate, you can get a smaller monthly payment or afford more house than you could with a fixed-rate loan.”

On the flip side, just remember, if you have an ARM, your rate will change over time. As Barron’s explains there’s the potential for higher costs later:

“Adjustable-rate loans offer a lower initial rate, but recalculate after a period. That is a plus for borrowers if rates come down in the future, or if a borrower sells before the fixed period ends, but can lead to higher costs if they hold on to their home and rates go up.”

So, while the upfront savings can be helpful now, you’ll want to think through what could happen if you’re still in that home when your initial rate ends. Because while projections show rates are expected to ease a bit over the next year or two, no forecast is guaranteed. 

That’s why it’s essential to talk with your lender and financial advisor about all your options and whether an ARM aligns with your financial goals and your comfort with risk.

Bottom Line

For the right buyer, ARMs can offer some big advantages. But they’re not one-size-fits-all. The key is understanding how they work, weighing the pros and cons, and thinking through if they’d be something that would work for you financially. And that’s why you need to talk to a trusted lender and financial advisor before you make any decisions.

Housing Market Forecasts for the Second Half of 2025

a screenshot of a mobile app

Some Highlights

  • Are you wondering what to expect if you buy or sell a home in the second half of the year? Here’s what the expert forecasts tell you.
  • Mortgage rates are expected to come down slightly. There will be more homes available for sale. And as inventory rises, home price growth will moderate.
  • Want to know what this could mean for your plans? Connect with a local agent and talk through it together.

Why Would I Move with a 3% Mortgage Rate?

If you have a 3% mortgage rate, you’re probably pretty hesitant to let that go. And even if you’ve toyed with the idea of moving, this nagging thought may be holding you back: “why would I give that up?”

But when you ask that question, you may be putting your needs on the back burner without realizing it. Most people don’t move because of their mortgage rate. They move because they want or need to. So, let’s flip the script and ask this instead: 

What are the chances you’ll still be in your current house 5 years from now?

Think about your life for a moment. Picture what the next few years will hold. Are you planning on growing your family? Do you have adult children about to move out? Is retirement on the horizon? Are you already bursting at the seams?

If nothing’s going to change, and you love where you are, staying put might make perfect sense. But if there’s even a slight chance a move is coming, even if it’s not immediate, it’s worth thinking about your timeline.

Because even a year or two can make a big difference in what your next home might cost you.

What the Experts Say About Home Prices over the Next 5 Years

Each quarter, Fannie Mae asks more than 100 housing market experts to weigh in on where they project home prices are headed. And the consensus is clear. Home prices are expected to rise through at least 2029 (see graph below):

a graph of a graph showing the price of risingWhile those projections aren’t calling for big increases each year, it’s still an increase. And sure, some markets may see flatter prices or slower growth, or even slight dips in the short term. But look further out. In the long run, prices almost always rise. And over the next 5 years, the anticipated increase – however slight – will add up fast.

Here’s an example. Let’s say you’ll be looking to buy a roughly $400,000 house when you move. If you wait and move 5 years from now, based on these expert projections, it could cost nearly $80,000 more than it would now (see graph below):

That means the longer you wait, the more your future home will cost you. 

If you know a move is likely in your future, it may make sense to really think about your timeline. You certainly don’t have to move now. But financially, it may still be worth having a conversation about your options before prices inch higher. Because while rates are expected to come down, it’s not by much. And if you’re holding out in hopes we’ll see the return of 3% rates, experts agree it’s just not in the cards (see graph below): 

a graph with lines and numbersSo, the question really isn’t: “why would I move?” It’s: “when should I?” – because when you see the real numbers, waiting may not be the savings strategy you thought it was. And that’s the best conversation you can have with your trusted agent right now.

Bottom Line

Keeping that low mortgage rate is smart – until it starts holding you back.

If a move is likely on the horizon for you, even if it’s a few years down the line, it’s worth thinking through the numbers now, so you can plan ahead.

What other price point do you want to see these numbers for? Connect with a local agent to have a conversation, so you can see how the math adds up. That way, you can make an informed decision about your timeline.

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