Short answer. Most analysts treat 5.5%–6.5% as the practical equilibrium 30-year fixed mortgage rate under normal economic conditions. The full-history (1971–2024) average is ~7.7%, but that's skewed by the inflationary 1980s.
"Normal" depends on your reference window:
- Full PMMS series average (1971–2024): ~7.7%
- Post-2000 average: ~5.4%
- Post-2010 average: ~4.6%
- 2010s decade average: ~4.0%
- Pre-2008 modern average: ~7.0%
The case for 5.5%–6.5% as "normal": this is the range mortgage rates would clear at in an economy where the Fed sets the federal funds rate at its long-run neutral level (roughly 2.5%), inflation is anchored near 2%, the 10-year Treasury trades around 3.75%, and the historical mortgage-Treasury spread of 1.5–2.0 percentage points holds.
The 2.96% reading was historic, not normal
The 2021 record-low 2.96% reading was the product of a once-in-a-century pandemic monetary response — sustained zero interest rates plus $120B/month in MBS purchases. It is not a reasonable baseline for forward expectations.
Sources
U.S. Census Bureau Survey of Construction; National Association of Realtors Existing Home Sales report; Freddie Mac Primary Mortgage Market Survey; National Bureau of Economic Research Business Cycle Dating Committee.