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The average 30-year mortgage rate in the United States is just under 7% as of this writing, but it wasn’t too long ago when rates below 4% — and even 3% — were the industry standard.

Many people will tell you things like “4% mortgage rates are never coming back.” But it wasn’t that long ago that things like 5% CD yields seemed completely unrealistic — until they happened in 2023 for the first time in decades.

The fact is that 4% mortgage rates aren’t nearly as outlandish as they might sound right now, and they could come back under the right circumstances. Here’s what you need to know, and when I believe we’ll see 4% mortgage rates again.

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Will we see 4% mortgage rates ever again?

To be clear, I don’t think the sub-3% mortgage rates we saw during the COVID-19 pandemic are coming back anytime soon (although I’d hesitate to say “never”). However, mortgage rates that start with a “4” haven’t exactly been uncommon in the past.

Sub-5% mortgage rates were the norm during most of the 2010s, for example, and there were several periods during that decade where the average 30-year mortgage rate fell below 4%, including parts of 2012, 2015, and 2016. I certainly think we could see 4% rates come back in the not-too-distant future. But there’s a caveat.

The short answer is that (in my opinion) we’ll likely see mortgage rates that are in the 4% range at some point in the future, but it would most likely mean that the economy weakened enough for the Fed to cut rates below what it would consider “neutral” monetary policy and Treasury security yields fell significantly from current levels.

Think of it this way. If the 10-year Treasury yield fell by about 2 percentage points in a recession (which isn’t unprecedented), we could expect the average mortgage rate to behave in the same way. That would mean 30-year mortgage rates that start with a 4.

The short version is that I wouldn’t be surprised to see 4% mortgage rates the next time the U.S. economy falls into a recession. In fact, I’ll go so far as to predict that will happen, as long as there isn’t elevated inflation that causes the Fed to avoid making meaningful rate cuts.

What would 4% mortgage rates mean for home buyers?

Home prices have soared in recent years, but that’s only one side of the home affordability equation. In fact, the average 30-year mortgage rate’s rise from about 3% at the beginning of 2022 to about 7% in late 2024 has been even more impactful in many cases — unless you’re a cash buyer, of course.

Consider this example. Let’s say that you’re planning to buy your first home for $500,000, and plan to make a 20% down payment, so you’ll need a $400,000 mortgage.

If you get a 7% APR mortgage today, you can expect a $3,421 monthly payment (assuming national averages for taxes and insurance). However, if you get a 4% mortgage rate, your monthly payment would drop to $2,669. Your monthly housing payment would be 22% lower for the exact same home at the exact same purchase price.

The bottom line

As mentioned, I don’t necessarily expect mortgage rates to drop into the 4% range soon, unless the U.S. economy falls into a deep recession. But the reality is that at some point the economy will turn sour to the point where the Fed is forced to cut rates below its neutral level, and once that happens, 4% mortgage rates won’t be out of the question.

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