Mortgage rates have typically fallen during recessionary periods. Douglas Rissing/Getty Images
Recession headlines come and go in today's news cycle, which is filled with trade war anxieties, stock market roller-coaster rides and global conflict. No one wants to pin their hopes on a major economic setback. But since recessions have often created more favorable conditions for mortgage rates, many of my clients want to know: Will buying a home become more affordable in a recession?
Since the beginning of 2025, average 30-year fixed mortgage rates have been stuck in the high 6.5% to 7% range. Most housing experts, myself included, aren't expecting rates to move much lower before the end of this year. What would it take for mortgages to drop? Could a dramatic shock to the economy send rates down below 3%, like we saw during the pandemic?
Not necessarily. Having navigated the real estate market for over two decades, I've witnessed its highs and lows, including the 2008 seismic crash.
When it comes to buying a home, the market is just one piece of the puzzle, and there's always an opportunity for certain homebuyers. If you're financially ready, the current economic landscape could actually tip the scales in your favor. Let's explore what a recession could mean for mortgage rates, home prices and your journey to homeownership.
Do mortgage rates go down in a recession?
During an economic downturn, mortgage rates tend to decrease for a few reasons. Market uncertainty can cause investors to seek the stability of government bonds, driving up bond prices and consequently lowering their yields (which are tied to interest rates).
Recessions also typically lead to less consumer spending and more job losses, which in turn reduces demand for mortgage loans. This decreased demand can cause lenders to reduce rates. Moreover, the Federal Reserve usually cuts its short-term interest rate during recessionary periods. Lower borrowing rates can help stimulate the economy by encouraging more households to spend and take out loans.
Mortgage rates did drop in recent economic depressions, both in 2020 and 2008. But things are messier this time around. There's political volatility and economic uncertainty everywhere, and the Trump administration's policies are changing daily. Even though rates could see some dips, they might also shoot back up.
If you're holding out for 4% or 5% mortgage rates, you'll be waiting longer than you'd like. It's going to take far more negative economic news to see rates fall in a big way.
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