Are 7% Mortgage Rates the New Normal or Not?

Published: 01 Aug 2025

Author: Precedence Research

Share :

Mortgage rates are inching their way towards the 7% mark again, and it raises trepidation among potential prospects and homeowners. Although such a high rate might be unusual to the citizens who are used to the low pandemic rates, it is perfectly commonplace historically. Based on the historical mortgage rates provided by Freddie Mac. The average of the 30-year fixed mortgages over the last 54 years is 7.71%, which implies that current rates are likely to be pushed higher before confirming the long-term picture. Furthermore, with the rate of change in the last few years, it is not unlikely that will reach the 7% mark once more in the coming years.

Major housing and financial institutions are forecasting that they will only narrowly miss the 7% prediction. The average interest rates are expected to end the year at a low 6.7% by 2025, with a slight declining trend to the end of 2026 of about 6.4%. Fannie Mae predicts that 2025 will end with rates just below 6.5% and by the end of 2026, rates will fall marginally to 6.1%. Realtor.com is also predicting a drop with less intensity by estimating the rates to be around 6.4% by the end of the year 2025. But with the state of being so close to 7% already, it only takes some economic turbulence or just some switches in policy to put us over the edge once again.

The Federal Reserve can change its outlook in case of deterioration of the global economic outlook or case of a reduction in inflation. As early as last December and January, we have observed how easily they can fluctuate, in only four weeks in late December 2024 to mid-January 2025. The rates increased by 0.32% points in a month to 7.04%. However, the rates were as low as 6% in August, September, and October 2024. Such volatility makes it not easy to forecast the future trend of the market. Furthermore, the general opinion of forecasters is that there exists a higher-for-longer rate environment and purchasers ought to plan as such.