Mortgage rates will not fall below 3%.

If you are a homebuyer in the US waiting to return to ultra-low mortgage rates, don’t hold your breath.

The era of short-term 3% interest rates for 30-year fixed mortgages is over, and it’s not likely to return anytime soon — perhaps decades, says Lawrence Yoon, chief economist at the National Association of Realtors.

“One can’t really predict the future, but I don’t see mortgage rates getting back into the 3% range for the remainder of my life,” he says.

That’s because average 30-year fixed mortgage rates of 3% or less were an anomaly related to the pandemic, lasting from roughly July 2020 to November 2022. Historically, rates have been closer to an average of 7% over the past 50 years and According to data from Freddie Mac.

Historically low mortgage rates during the pandemic, Yoon says, were “an exceptional measure during exceptionally uncertain times.”

With the pandemic came economic uncertainty not seen since the 2008 financial crisis. Fearing a prolonged recession, the Federal Reserve followed the same playbook it used in 2008, pumping money into the economy to stimulate growth.

As was the case in 2008, the Fed cut interest rates to nearly 0%, created emergency lending programs and bought government bonds and mortgage-backed securities, otherwise known as quantitative easing.

Since mortgage rates are closely linked to the Federal Reserve’s benchmark interest rate and could fall further through quantitative easing, interest on mortgages subsequently hit rock bottom at 2.67% in January 2021.

Congress also passed trillions of dollars in Covid-19 relief and stimulus spending, which helped increase the US national debt by nearly 30% between 2020 and 2022, According to Treasury data.

However, unlike in 2008, the economy recovered quickly and high inflation soon became an issue. By the spring of 2021, the year-on-year inflation rate has accelerated beyond the Fed’s benchmark of 2%, forcing the central bank to start raising interest rates again. And with that, mortgage rates went up, too.

As a result of inflation and current federal deficit spending, Yoon doesn’t think the Fed is likely to cut interest rates close to 0% again, even in the event of a financial market panic or pandemic.

Other economists who spoke to CNBC Make It also say that homebuyers shouldn’t expect a return to record low mortgage rates.

“It is unlikely that the Fed will respond with the same breadth and force as it did in 2020, as very low mortgage rates in 2020 were caused by very unique circumstances” related to the pandemic, says Abe Omodonbe, chief economist at PNC Financial. services.

“I haven’t seen mortgages this low in over 30 years in this business,” says Dottie Hermann, vice president at Douglas Elliman. “We are unlikely to see rates this low any time soon.”

The current average mortgage rate for a 30-year fixed-rate mortgage is 6.81% as of July 6, which is slightly lower than the November peak of 7.08%. Per Freddie Mac data.

However, many forecasts predict a steady decline over the next year or so.

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