Why people still buy homes even when mortgage rates seem higher

Glance at the headlines and you might think no one is buying a home because interest rates won't come back down.

In reality, people still close on homes every day. In fact, data from the Mortgage Bankers Association this summer has shown demand for new mortgages is higher than it was this time last year.

Let's take a look at why this is happening.

...in as little as 3 minutes – no credit impact

Today's rates aren't as unusual as they feel

It's easy to look at a rate in the high 6% range and assume something has gone wrong with the market. But, when seen from a broader perspective, rates like today's aren't an anomaly. They're closer to the norm than many current buyers think.

For most of the last five decades, average 30-year mortgage rates sat well above where they are today. What feels unusual is really the memory of the unusually low rates available for a few years around 2020 and 2021, which were themselves a response to an extraordinary economic moment, not a baseline to expect going forward.

The real comparison isn't rate vs rate. It's buying vs. renting

People like to talk about interest rates, and rates do matter. After all, a slight change in a mortgage rate can translate into thousands of dollars over a 30-year mortgage term.

But a more useful cost comparison pits buying vs renting. Renters often underestimate this comparison because a mortgage rate is a single, visible number, while rent increases show up quietly, one lease renewal at a time.

Here's how that plays out over five years on a representative $280,000 loan at today's average 30-year fixed rate of 6.78%, compared to a $1,900 monthly rent increasing 3% annually, which is in line with typical historical rent growth:

Scenario	Monthly payment	Total paid over 5 years
Buying (30-year fixed, principal & interest)	$1,822, unchanged	about $109,300
Renting ($1,900/month, +3% annually)	$1,900, rising to about $2,203 by year 5	about $121,000

Example is for illustrative purposes only. Rates, payments, and total interest will vary based on credit profile, loan terms, and market conditions. Figures do not include property taxes, insurance, HOA fees, or maintenance costs, which vary by buyer and property.

Even before accounting for equity, the hypothetical renter in this example pays more out of pocket over five years, simply because the mortgage payment stays flat while rent doesn't.

...in as little as 3 minutes — no credit impact

What buying still gets you that renting doesn't

The rent-vs-buy math above tells only part of the story, because it doesn't yet count what a buyer gets back. Every mortgage payment gets divided between interest and principal, and the principal portion builds equity. Equity is value you can keep, rather than money that's gone the moment you pay it.

On that same $280,000 loan, roughly $17,000 of the payments made over five years goes toward paying down the loan balance itself, not just interest. That's money a renter simply doesn't have access to build, regardless of how disciplined they are about saving elsewhere, because rent doesn't create a personal asset.

Buying also locks in payment stability. A fixed-rate mortgage's principal and interest payment doesn't change for the life of the loan, while rent is set by a landlord and typically rises at each renewal.

Property taxes and insurance rates added to a loan payment can increase, adding to the mortgage payment. Still, principal and interest predictability makes long-term budgeting easier, even if property taxes and insurance can still shift over time.

When renting still makes more financial sense

None of this means buying is automatically the right move for everyone right now. If you expect to move within the next two to three years, the closing costs and time it takes to build meaningful equity can outweigh the benefits, and renting gives you flexibility a mortgage doesn't.

Renting also makes more sense if you're not yet financially ready: if a down payment would drain your emergency savings, if your income is unstable, or if your credit profile would put you into a rate meaningfully higher than today's averages.

Buying before you're ready can turn a generally sound long-term decision into a genuinely stressful one. Renting also shifts maintenance costs and responsibilities to a landlord, which has real value if you'd rather not manage a roof repair or a broken water heater yourself.

How to decide if now's the right time for you

The national rent-vs-buy math is a useful starting point, but your actual numbers depend on your specific situation. A few factors matter more than the headline mortgage rate:

Your debt-to-income ratio determines how much home you can comfortably afford, and lenders generally want your total monthly debt payments, including the new mortgage, to stay under a set share of your gross income.

Your credit score directly affects the rate you're offered, so comparing multiple lenders and knowing your options matters more than trying to time the broader market. And your down payment savings, along with a cushion for closing costs, determine whether you're actually ready to move now versus in six or twelve months.

The clearest way to answer these questions with real numbers, rather than national averages, is to get pre-approved. A pre-approval shows your actual rate, estimated payment, and how much you can borrow, based on your finances rather than a hypothetical example.

...in as little as 3 minutes – no credit impact

Frequently asked questions

Rates are around 6.8% right now. Is it still smarter to buy than keep renting, or should I just wait it out?

It depends on how long you plan to stay and whether rent in your area is likely to keep rising. Because a fixed mortgage payment doesn't increase while rent typically does, waiting for a lower rate often means paying more in rent in the meantime, potentially offsetting any savings from a future rate drop.

I make about $75,000 a year and my rent keeps going up every lease renewal. Would buying actually save me money long-term even at today's rates?

Possibly, depending on local home prices relative to rent in your area and how long you plan to stay. The clearest way to know is to run your specific numbers: get pre-approved to see your real rate and payment, then compare that flat payment against your rent's likely trajectory over the next several years.

If I only plan to stay in a city for 2 to 3 years, does it still make sense to buy instead of rent?

Usually not. Closing costs and the slow pace of early equity buildup mean a short time horizon often favors renting, since you may not stay long enough to recoup upfront costs or benefit meaningfully from paying down principal.

How much of my mortgage payment actually goes toward building equity versus just paying interest in the first few years?

Early in a loan's term, most of each payment goes toward interest rather than principal, though the split shifts toward principal over time. Even so, every payment builds some equity from day one, which is something a rent payment never does.

I have a 650 credit score. Will high rates combined with average credit make buying not worth it for me right now?

A 650 score will likely mean a higher rate than a borrower with excellent credit, but it doesn't rule out buying. Getting pre-approved will show your actual rate based on your credit profile, which is a more useful number than assuming the worst from a national average.

Is it true that mortgage rates today are actually close to historical norms, or are we in an unusually expensive borrowing environment?

Rates in the high 6% range are close to long-run historical norms. The historically low rates seen around 2020 and 2021 were the exception, not the baseline, so today's environment is less abnormal than it might feel.

What are the real risks of buying now if rates might drop next year — would I be stuck with a bad deal?

If rates drop meaningfully after you buy, refinancing is generally an option, though it comes with its own costs and qualification requirements. The risk of waiting is that rent and home prices don't pause while you wait for a specific rate target that may or may not arrive.

Does it ever make more financial sense to keep renting even if I can afford to buy?

Yes. If you value flexibility, expect to relocate soon, or would rather not take on maintenance responsibilities, renting can be the better choice even when the raw math favors buying. Affordability alone isn't the only factor worth weighing.

Bottom line

High mortgage rates don't automatically mean buying is a bad idea, and today's rates aren't as far outside historical norms as they can feel.

The more useful comparison isn't today's rate against some hoped-for future rate. It's a flat mortgage payment against rent that typically keeps climbing, plus the equity a mortgage payment builds that a rent payment never does.

While inflation and global instability have put upward pressure on mortgage rates this year, buying a home may still compare well against long-term renting.

A mortgage pre-approval helps set a comparison point.

...in as little as 3 minutes — no credit impact