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Hal Bundrick, CFP® · Senior Writer Updated Wed, November 26, 2025 at 6:15 AM GMT+8 5 min read With 30-year fixed home loan rates remaining above 6% for over three years now, 5% home loan rates are a faint memory. Most housing experts do not expect mortgage rates to decline significantly further through the end of 2026. However, a major economic setback — or simply time — could change that.
MORE: See our top picks for mortgage lenders for first-time home buyers.
When will mortgage rates go down to 5%?
National Association of Home Builders CEO Jim Tobin believes that any 30-year mortgage rate consistently below 6% would be good news.
"People are certainly buying down into the fives anyway through some of these [new home builder] incentives," Tobin said in a Nov. 18 interview with Yahoo Finance's Julie Hyman. However, he added, "If we have to wait till we get to 5%, I think that's a much longer road."
"We have to change the mindset of not only buyers, but sellers out there that we are not going back to 3% or 4% mortgages," Tobin added. "That is a break-glass moment, whether it was after the Great Recession or after the COVID pandemic. Those days aren't going to come back."
However, he does think mortgage rates can settle below 6%.
What would trigger lower mortgage rates? Realtor.com chief economist Danielle Hale said it's a matter of time.
"The most likely catalyst is time. As time goes by, as you get closer to that 2% inflation anchor that the Fed is targeting, it would normalize the (federal funds rate), and it would normalize longer-term interest rates," Hale told Yahoo Finance. "The federal rate would probably get back into the 2-1/2% range or so, which is probably enough to bring long-term yields back around 4%, and that would probably put mortgage rates in the 5.5% to 6% range."
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Learn about how the Fed rate decision impacts mortgage rates.
A national financial setback could speed the move to 5%
"You could get [to 5% mortgage rates] faster if you were to have a recession," Hale added. "That could cause the Fed to cut rates, and you could see 5.5% — maybe even slightly below 5.5%, in a really bad recession."
Consumer confidence, as measured by the non-partisan, nonprofit The Conference Board, declined in November, signaling pessimism about the outlook for income, business, and the job market.
"The share of consumers believing a recession is 'very likely' over the next 12 months fell further in November, but the share of consumers thinking that the economy was already in recession rose for the fourth consecutive month," the report said.
With a lack of key economic reports during the government shutdown, data supporting or rejecting the possibility of a recession have been unavailable. However, Treasury Secretary Scott Bessent recently said that the U.S. is not at risk of a recession, though "... housing has been struggling, and interest rate-sensitive sectors have been in a recession," he added in an interview with NBC News.
Of course, a recession could bring many complications into the affordability equation: Job and income insecurity are among the most likely.
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Do mortgage rates decrease in a recession?
Up next
How will 5% rates impact buying competition?
If mortgage rates fall into the 5% range, Hale believed it would bring buyers and sellers back into the market. But would a resurging market introduce more competition for buyers?
Hale said that while home buyers are looking for lower mortgage rates, home sellers are too. Listings may increase as sellers see an opportunity to move into their next house at a reasonable interest rate.
"When rates drop, normally that would increase competitiveness in the market because it creates opportunities for home buyers. But I think, interestingly, this will also create some opportunities for home sellers, so we might not see competitiveness pick up quite as much."
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How to prepare for 5% mortgage rates
The window for lower mortgage rates may open quickly — and perhaps close just as fast. As a borrower and home buyer, you'll want to be prepared.
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Have your down payment in the bank. When an opportunity to buy presents itself, you'll have the funds ready to take action. Have enough for closing costs too.
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Check your credit score and get your personal finances in shape.
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Nail down your home price range and target monthly payment. Knowing how much house you can afford and narrowing down the appropriate neighborhoods can set you up for early success when the time is right.
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Explore a prequalification. Talk to a few mortgage lenders and have your home loan options lined up. You can have the lenders in your pocket for when it's time for an official loan preapproval.
See the mortgage lenders with the lowest interest rates this week.
When will mortgage rates go down to 5%? FAQs
Are mortgage rates expected to drop to 5%?
It's not a common prediction among industry observers, but one expert believes so. Chris Whalen, an investment banker in New York, told Yahoo Finance in a phone interview that 5% is likely the next move for mortgage rates. "If you really wanted to put me on the spot [and ask me] 'how low do you think mortgage rates will go in the next cycle?' I'd say 5%."
Will mortgage rates ever be 4% again?
It’s unlikely that mortgage rates will fall to 4% anytime soon. Unusually low mortgage rates became possible only after the 2008 housing crisis and the ensuing recession. Then, the COVID pandemic further suppressed them. It was a rare set of circumstances that pushed mortgage rates to historic lows. It would likely take equally uncommon events to cause such low rates to happen again.
When were 5% mortgage rates common?
The average 30-year mortgage interest rate dipped into the lower 5% range for about six weeks in the summer of 2003. Then again, briefly in March 2004. A longer stretch of mortgage rates near and well below 5% began during the housing crisis and recession of 2008 and lasted 14 years, ending in October 2022.
Will Fed interest rate cuts drop mortgage rates to 5%?
Probably not, on the Fed's current schedule. It would likely take an economic reversal, spurring extraordinary federal funds rate cuts, to get mortgage loan rates close to 5%.
Should I wait for mortgage rates to drop to 5%?
Buy a home when you can afford to. A mortgage rate is not a lifetime commitment. It's likely you'll own more than one house, and even if you buy at a higher rate now, you can always refinance your mortgage when rates come down.
Laura Grace Tarpley edited this article.
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