Should You Wait for Lower Interest Rates?

Jul 6

A Historical Perspective and Why Now Might Still Be the Right Time to Buy

If you’ve been following mortgage news, you’ve probably seen plenty of headlines about rising interest rates. Many homeowners feel locked in by what people call their golden handcuff mortgage—an ultra-low rate they don’t want to give up. Meanwhile, first-time buyers often feel discouraged that they missed the window to secure a sub-3% mortgage.

Before you let fear or regret hold you back, it helps to zoom out and look at the historical context. Rates move in cycles, and understanding the bigger picture can bring perspective and confidence. Here’s what you should know about mortgage rates over time, why today’s rates are more typical than they appear, and why buying a home now may still be a smart long-term choice.

A Historical Look at Mortgage Rates

It’s easy to compare today’s rates to the record lows of 2020 and 2021 and feel like you missed out. But those rates were not normal. They were historically unprecedented.

Consider this timeline:

1970s–1980s: Mortgage rates rose dramatically due to inflation. In 1981, the average 30-year fixed mortgage peaked at over 18% (Federal Reserve Bank of St. Louis, 2024).
1990s–2000s: Rates stabilized in the 6–9% range, which was considered a reasonable baseline for decades (Freddie Mac Primary Mortgage Market Survey, 2024).
2010s: The Great Recession and Federal Reserve policy brought rates down to the 3–5% range, making homeownership more accessible (Urban Institute, 2018).
2020–2021: The COVID-19 pandemic triggered historically low rates—some as low as 2.65%—due to emergency economic measures (Freddie Mac, 2021).
Today: Mortgage rates have climbed back into the 6–7% range, in line with long-term averages (Mortgage Bankers Association, 2024).

In other words, while today’s rates may feel high in recent memory, they are historically moderate.

Why Keeping Your Ultra-Low Rate Often Makes Sense

If you were able to buy or refinance during the period of 2–3% mortgage rates, you’re in an advantageous position. A rate that low can save you thousands of dollars over the life of your loan and dramatically reduce your monthly payment.

This is why many homeowners feel reluctant to sell and trade their low rate for a higher one. Here are a few reasons keeping your existing mortgage can be a smart financial move:

Monthly Savings
According to Zillow, a 1% difference in interest rate can add or subtract hundreds of dollars from a typical monthly payment (Zillow Research, 2023).

Equity Accumulation
Homeowners who purchased in the past five years have built substantial equity—an estimated 50% increase in average home values between 2017 and 2022 (National Association of Realtors, 2023).

Financial Stability
A fixed, low payment provides predictability even as broader inflation affects food, utilities, and other essentials (Bureau of Labor Statistics, 2024).

Flexibility
Lower monthly obligations can free up cash to save, invest, or pay down other debt.

If your home still fits your life and goals, keeping your “golden handcuff” rate often makes the most sense.

When Moving May Still Be the Right Decision

That said, life doesn’t always accommodate mortgage rate cycles. Sometimes moving isn’t optional—it’s necessary or strategically beneficial. Here are common reasons buying now can still be the right decision:

Your Space No Longer Fits
Families grow and needs change. The National Association of Home Builders reports that more than 40% of buyers cite the need for more space as a primary reason for moving (NAHB, 2023).

Relocation for Work or Family
About 9.8 million people moved in 2022 for job or family reasons (U.S. Census Bureau, 2023).

Becoming a First-Time Buyer
Renting remains expensive and unpredictable. In many markets, median rents are still rising faster than inflation (Apartment List National Rent Report, 2024).

Locking in Today’s Prices
Many economists expect home prices to continue appreciating over the long term (Goldman Sachs Housing Outlook, 2024).

Even if your mortgage rate is higher, purchasing now can help you secure an asset that gains value over time.

Reframing the Rate Conversation

It’s common for buyers to fixate on comparing their possible rate to friends or neighbors who bought when rates were historically low. But your mortgage rate is just one factor in a much larger equation.

While it affects your payment, it doesn’t dictate whether buying is the right step for you now. Consider:

You can refinance if rates fall in the future.
Homeownership stabilizes your housing costs over the long run.
Building equity remains one of the most reliable paths to long-term wealth.
Renting often means 100% of your payment goes to someone else’s equity.

The National Association of Realtors estimates that homeowners have a net worth more than 40 times higher than renters (NAR, 2023).

Waiting for the “perfect” rate can mean delaying important life plans and potentially missing years of appreciation.

Should You Wait for Rates to Fall?

Most economists predict mortgage rates could moderate in the next year or two—but few expect a return to 3% financing. For example, Fannie Mae forecasts rates to decline modestly into the mid-5% range by late 2025 (Fannie Mae Economic Forecast, 2024).

Even if rates do fall, competition will likely increase, driving prices higher and creating bidding wars. This happened in 2020 and 2021 when low rates sparked unprecedented demand and rapidly rising prices.

For many buyers, the cost of waiting could outweigh the benefits of a slightly lower rate.

Key Considerations Before Deciding

Before you make your decision, consider these questions:

Does my current home still meet my needs?
Am I prepared to wait indefinitely for rates to improve?
How does buying now impact my monthly budget and long-term goals?
If rates drop, will I be positioned to refinance?
What will I pay if I continue renting or living in a home that no longer fits?

Thinking through these questions can help you decide whether now is the right time to act.

Let’s Build a Plan That Works for You

Every homeowner’s situation is unique. The right choice is rarely about interest rates alone. It’s about your goals, your life stage, and your vision for the future.

If you’d like to talk through your options, I’m here to help you assess the numbers, explore the market, and build a plan that gives you clarity and confidence.

Have questions? Let’s connect. I’m here to help you take the next step with confidence.