Today’s average mortgage rate hovers around the 6.75% mark – a full 3/4% higher than the 5.99% we saw prior to the Iran War.
The mortgage industry, which had ramped up for what they thought would be a banner year with steadily falling rates, is in panic mode. High rates are why there has been and will continue to be a wave of mergers and acquisitions, as many mortgage companies are simply giving up.
The real estate industry is feeling the pain too, as rates heavily influence buyer activity.
So – the question is: will the real estate and mortgage industries survive?
And…it seems pretty likely – given that rates were higher for most of the last 3 and 1/2 years.
I used to put high rates in perspective by reminding readers that the “average rate” was over 10% for most of the 1980s (they peaked at 18% in September of 1981), over 8% for most of the 1990s, and over 6% for much of the early 2000s.
But now, I only have to go back three years to put rates in perspective. This is because they were often much higher than they are today – and somehow we all survived.
Rates first peaked at 7.3% in October of 2022 – causing panic because nobody had seen 7% rates for over 20 years. Rates hit 8% in October of 2023! 7.5% in April of 2024. And 7.15% in early 2025 – remaining above 7% for most of the first half of the year.
So yeah…we’re all “suffering” now in the most first-worldly way, but comparatively speaking we were in a veritable interest rate hell for most the last three years.
Here is some additional positive perspective… many buyers have now accepted today’s higher rate environment and are no longer “anchored” to COVID rates. As a result, the purchase market remains relatively robust.
Solution
I still like temporary buydowns as a solution to quell the concerns of buyers who are concerned about high rates – but with a twist.
As most people know, buyers are not allowed to pay for buydowns. And many sellers push back on covering the full cost. So, agents might consider pursuing “hybrid” buydowns – where the cost is shared by the lender and the seller.
We can also offer 100% lender-paid buydowns, but the rate will be a bit higher.
And finally, I am not a fan of ARMs (Adjustable-Rate Mortgages) as a relief mechanism because buyers often get too little bang for their buck – meaning ARM rates are not low enough compared to fixed rates to justify the extra risk.
