Why 3% Rates Happened — and Why We Probably Won’t See Them Again

Written by Gillian Gooch • August 21, 2025

It’s tempting to think, “I’ll just wait until mortgage rates drop back to 3% before I buy.” But here’s the reality — those historically low rates were a once-in-a-lifetime situation, and it’s unlikely we’ll see them again anytime soon.

The Perfect Storm That Led to 3% Rates

Mortgage rates around 3% were the result of an extraordinary set of events:

• The pandemic shutdowns (2020) — To prevent the economy from collapsing, the Federal Reserve slashed interest rates to near zero.

• Economic uncertainty — Investors moved money into safer investments like government bonds, which pushed mortgage rates even lower.

• A push to stimulate the housing market — Low borrowing costs encouraged home buying and kept the economy moving.

Why It’s Not the “New Normal”

Historically, mortgage rates in the U.S. have averaged between 5% and 7%. Those 3% rates were never intended to last — they were an emergency measure during an unprecedented global crisis.

As the economy recovered, inflation rose sharply. The Fed had to raise rates to slow spending and stabilize prices. That’s why today’s rates look higher compared to the pandemic years — but in reality, we’re back in a more typical historical range.

The Risk of Waiting

Holding out for 3% rates could mean:

• Paying more for the same house later if home prices continue to rise.

• Missing years of equity growth that could help you build wealth.

• Facing more competition if rates drop and more buyers jump into the market.

Remember — you can always refinance to a lower rate later, but you can’t go back and lower the purchase price you pay today.

Buying a home is about more than chasing the lowest interest rate. It’s about timing that works for your life, your needs, and your goals.

In faith and service,
Gillian Gooch, Realtor®
Gillian Gooch Properties