Is a mortgage rate in the 5% range the sweet spot for your home-buying budget?

With mortgage rates remaining in the 6.5% to 7% range, most housing experts aren't expecting rates to move much lower through the end of this year. However, a major economic setback could trigger much lower mortgage rates.

So, expect rates to be mostly unchanged. But prepare for 5% mortgage rates.

Learn more: How to buy a house in 13 steps

What would trigger lower mortgage rates? Realtor.com chief economist Danielle Hale said it's a matter of time.

"The most likely catalyst is time. As time goes by, as you get closer to that 2% inflation anchor that the Fed is targeting, it would normalize the [federal funds rate], and it would normalize longer-term interest rates," Hale told Yahoo Finance. "The federal rate would probably get back into the 2.5% range or so, which is probably enough to bring long-term yields back around 4%, and that would probably put mortgage rates in the 5.5% to 6% range."

However, the Federal Reserve continues to slow-walk rate cuts. The market isn't expecting it to lower short-term interest rates again until September at the earliest.

"You could get there faster if you were to have a recession," Hale added. "That could cause the Fed to cut rates, and you could see 5 1/2% — maybe even slightly below 5 1/2% in a really bad recession."

She noted that Federal Reserve rate cuts and lower mortgage rates are not a one-for-one proposition. Hale said that from last September through January, the Fed cut its benchmark rate by a percentage point, and mortgage rates rose almost the same amount.

Learn more: How the Fed rate decision impacts mortgage rates

Realtor.com research conducted in the first quarter of 2025 found that roughly 3 in 10 (29.8%) home buyers surveyed said a recession would make them at least "somewhat more likely" to buy a home.

"It seems that some shoppers are anticipating either lower mortgage rates or lower home prices, or both, in a recession to potentially create some sort of opportunity for them to buy," Hale said.

Of course, a recession could bring many complications into the affordability equation: job and income insecurity among the most likely.

If mortgage rates fall into the 5% range, Hale believes it would bring buyers and sellers back into the market. But would a resurging market introduce more competition for buyers?

Hale said that while home buyers are looking for lower mortgage rates, home sellers are too. Listings may increase as sellers see an opportunity to move into their next house at a reasonable interest rate: "When rates drop, normally that would increase competitiveness in the market because it creates opportunities for home buyers. But I think, interestingly, this will also create some opportunities for home sellers, so we might not see competitiveness pick up quite as much."

Learn more: How to get the lowest mortgage rate possible

The window for lower mortgage rates may open quickly — and perhaps close just as fast. As a borrower and home buyer, you'll want to be prepared.

1. Have your down payment in the bank. When an opportunity to buy presents itself, you'll have the funds ready to take action. Have enough for closing costs too.

2. Check your credit score and get your personal finances in shape.

3. Nail down your home price range and target monthly payment. Knowing how much house you can afford and narrowing down the appropriate neighborhoods can set you up for early success when the time is right.

4. Explore a prequalification. Talk to a few mortgage lenders and have your home loan options lined up. You can have the lenders in your pocket for when it's time for an official loan preapproval.

The average 30-year mortgage interest rate dipped into the lower 5% range for about six weeks in the summer of 2003. Then again briefly in March 2004. A longer stretch of mortgage rates near and well below 5% began during the housing crisis and recession of 2008 and lasted 14 years, ending in October 2022.

Probably no on the Fed's current schedule. It would likely take an economic reversal, spurring further federal funds rate cuts, to get mortgage loan rates close to 5%

Buy a home when you can afford to. A mortgage rate is not a lifetime commitment. It's likely you'll own more than one house, and even if you buy at a higher rate now, you can always refinance when rates come down.