Mortgage rates were 7% in 1997, too—here’s why buying a home feels more expensive today

Mortgage rates are around 7%, a level also seen in 1997, but buying a home feels more expensive today because house prices are much higher relative to incomes. The article explains that rates alone do not determine affordability: the cost of the home and the amount buyers need to borrow matter too.

Mortgage rates track 10-year US Treasury yields, which are influenced by inflation and government borrowing. After exceeding 18% in 1981, rates fell as inflation eased, reaching lows near 2.7% during the pandemic; persistent inflation, federal borrowing and investment in AI and data centres are now adding upward pressure. Fannie Mae forecast an average 30-year fixed rate of 7.5% through 2027.