Mortgage rates at 3% were an ‘anomaly.’ Here’s what a normal 30-year rate looks like.

Home buyers are frustrated by 7% mortgage rates. One economist suggests that they’ll need to get used to them.

Since the Federal Reserve started hiking interest rates in mid-2022, mortgage rates have doubled, surpassing 7%.

Higher mortgage rates have resulted in significantly higher monthly mortgage payments and made buying a home harder to afford. At a rate of 7%, the median monthly mortgage payment for a $392,200 home is roughly $2,800, near a record high, according to a Redfin analysis. At a rate of 3%, that monthly payment would be close to $1,800.

Yet if one takes a longer view of the U.S. economy and mortgage-rate trends, the data clearly show that the 30-year rate is nowhere near its peak. In the 1980s, that rate went up to 18%, more than double where it was as of early June 2024. 

In fact, based on historical averages, mortgage rates are closer to a “normal” rate now than they were during the pandemic, Doug Duncan, chief economist at Fannie Mae told MarketWatch in an interview. 

Between 1950 and 2000, the 30-year fixed-rate mortgage averaged roughly 6%, Duncan said. But during the pandemic — due to the Fed’s actions in easing monetary policy to support the U.S. economy amid widespread closures of businesses and other shutdowns — the 30-year mortgage rate fell as low as 2%. Many borrowers snapped that up.

So “a 6% mortgage rate is not unusual historically,” Duncan said. “It’s just that people saw these 3% mortgage rates and got spoiled. But that’s a historical anomaly. … Unless there’s some catastrophic economic event for the broader economy, we wouldn’t expect to see mortgage rates back at 3% in our lifetimes.”