Young buyers ask, ‘when will 5% mortgages return?’

Cash-squeezed first-time home buyers probably are scratching their heads and asking: when will mortgage rates fall back to an affordable 5% interest rate again?

Home-loan rates have been volatile and unpredictable in 2026. This type of roller-coaster activity in “Mortgageland”’ makes it hard to predict when to buy a house, and schedule a move to get the kids in school by September.

Looking at Freddie Mac’s rate archives, interest rates in 2026 decreased for four straight weeks until the U.S. and Israel attacked Iran at the end of February. Then, rates increased for five straight weeks Finally, mortgage rates fell for four consecutive weeks in April and early May.

Now, with the interest ratequarterback Federal Reserve Board chairman Jerome Powell about to step down, experts are reviewing his eight-year scorecard. An inescapable part of Powell’s legacy will be the post-pandemic inflation surge, when consumer prices rose by a four-decade high of 9.1% in June 2022.

Overall prices are now 27% higher than just before the pandemic six years ago, a staggering change for a country that had experienced little inflation for generations. Prices rose just 10% in the six years before the pandemic.

Today, groceries are 30% more expensive than six years ago, after they rose just 3.6% in the six years preceding COVID. So, how does a would-be home buyer fit a 6%-plus mortgage into that budget?

A look back to 1968 Long-term mortgage rates were about 6% in 1968, when this writer began working as a financial reporter for the Chicago Daily News.

“Kid, do you know anything about mortgages?” asked Albert Jedlicka, the paper’s award-winning real estate editor. My reply: “My folks have a 5% mortgage on our three-flat in Old Town, which they purchased in 1948. I think the loan was provided by the Polish National Alliance.”

In 1973, when I purchased my first home for $28,000 in the Irving Park “Villa’’ neighborhood, First Federal Savings & Loan granted my young family a $18,000 mortgage for 30 years at around 7.5% interest.

During my reporting career, I have seen mortgage rates soar over the moon to 18.63% during the recession of 1981, and fall back to 11.75% by 1985. Then, I purchased a vintage home for $140,000 in the Sauganash neighborhood on the Northwest Side and obtained a 30-year mortgage at 11.75% from Cragin Federal Savings & Loan. A few years later, I refinanced that loan with a 7.75% interest rate for 15-years at Cragin Federal.

In the late 1980s, I authored a best-selling book titled: “‘The Mortgage Manual,” that sold 50,000 copies. The book explained the intricacies of the mortgage market and gave wouldbe borrowers information on all the popular choices for financing a home.

Remember 3% home loans?

‘‘Gen-X” and Millennial” borrowers still remember a few years ago when a home buyer could lock in a 30-year fixed-rate mortgage at 3% interest or less. Many people became accustomed to rates that were in the 3% range in 2020 and 2021.

Thirty-year fixed-mortgage interest rates ended 2020 at a rock-bottom 2.65% the lowest level in the Freddie Mac survev history, which began in 1971. Home-loan rates set new record lows an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.

Mortgage rates may continue to be volatile, buť historically analysts say buyers are actually in a much better spot than they may think. Mortgage Rates Inch Down On May 14, mortgage rates ticked down a bit, reported Freddie Mac’s Primary Mortgage Market Survey. Benchmark 30year fixed-rate loans nationwide averaged 6.36% down from 6.37% week earlier. A year ago, 30-year fixed loans averaged 6.81% Fifteen-year fixed-rate mortgages averaged 5.71%, down slightly down from 5.72% a week earlier. A year ago, 15-year fixed loans averaged 5.92%.

A rate increase can feel frustrating for potential home buyers, especially when it looks unlikely that the 30-year rate will dropand stay in the affordable 5%range.

However, my five decades of reporting on the housing market and mortgage rates have taught me that current interest charges aren’t as bad as they might seem.

The sub-3% rates during the peak and the aftermath of the COVID-19 pandemic make rates in the mid-6% range feel high. Buť if you evaluate longer-term trends, today’s mortgage rates actually are not bad.

Rates decreased over the past year According to Freddie Mac data, the national average 30-year mortgage rate is down nearly one-half of 1 percentage point since early May of 2025. A year ago, the rate was 6.76%, and now, the rate is 6.36%. The average 15-year rate is down more than a quarter of 1 percentage point since early May last year. Going into May of 2025, it was 5.92%.

“‘Stable rates can encourage buyers who have been on the fence to move forward, helping to support a steady, gradual housing market,” said Matt Vernon, head of consumer lending at Bank of America.

Freddie Mac started tracking interest rates in April 1971, so analysts have mortgage data from more than 55 years to eye-ball.

When we calculate the average 30-year fixed mortgage rate since 1971, the average is 7.69%. That’s 1.33% higher than today’s benchmark rate. So, when we look at historical mortgage rates, today’s rates are better than they might seem.

Apart from the COVID-19 pandemic, the 30-year fixed rate has only fallen below 3.5% a handful of times since Freddie Mac started tracking rates in 1971, and it’s never stayed that low for weeks or months on end.

The highest weekly 30-year rate to date is 18.63%. This oCcurred in October of 1981, during a recession. That year, the average annual rate was 16.64%. Not only are today’s mortgage rates low compared to last year, buť they’re low when we look at rates from over 50 years. So, there shouldn’t be as much gloom in Mortgageland.

Putting rates into focus today Mortgage rates may be higher than home buyers would like, but they look much better when you view the bigger picture. If you’re planning on buying a home in 2026, analysts say borrowers should ask themselves the following key questions:

Can you afford to buy a house, regardless of today’s rates? Analyze everything from the down payment to monthly mortgage payments. On Chicago’s North Side, elevated home prices and a limited number of forsale listings continue to be the primary drivers of affordability challenges, according to John Irwin, veteran broker with Baird & Warner.

Will interest rates fall this year? Since the last Federal Reserve Board meeting in April, economic experts have predicted that the central bank will not cut the federal-funds rate much in 2026. This is one signal that mortgage rates won’t fall before the end of the year.

. If rates stay above 6% this year, why should you waste your time trying to outsmart the real estate market? Make your decision based on what your family can afford, and whether your lifestyle would be better with the benefits of homeownership, not on whether home-loan rates are a few basis points lower one week or the next.

The Freddie Mac survey reported that 30-year fixed-mortgage interest rates ended 2020 at a rock-bottom 2.65% the lowest level in history.

Archives of the Federal Housing Finance Board show longterm mortgage rates in the 1960s were about 6%, not much higher than the Great Depression of the 1930s, when lenders were charging 5% on five-year balloon loans.

Nearly six decades ago, between 1963 and 1965 borrowers could obtain a mortgage at 5.81% to 5.94%. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6%-t0-9% range.

In the early 1980s, runaway inflation caused home-loan rates to skyrocket into the stratosphere. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a jaw-dropping 18.63% in Oct. 1981 during that recession, which lasted a few years. Rates finally fell below 10% in april 1986, and then bounced in the 9%-to-10% range during the balance of the 1980s. nearly 26 years ago-in aug. 2000-when some of today’s Millennial borrowers were still in diapers, lenders were quoting 8.04%.

Between 2002 and 2011, rates bounced in the 4%-to-6% range. They inched into the 3%-to-4% range until 2020, when they fell into the rock-bottom 2%-bracket.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.