NAR predicts mortgage interest rates to settle into the lower 6% range by mid-2024, which is likely to motivate homebuying activity. The average 30-year fixed rate fell to a record low of 2.65% in January 2021 before rising to 7.79% in October 2023.
The market is cyclical; periods of high rates are often followed by a cool-off, and vice versa. Understanding the ebbs and flows of historical mortgage rates can help homebuyers fare better on the market.
Preparing for and getting pre-approved for a mortgage in advance can give you an advantage when trends finally shift toward a buyer’s market. You will stand out to sellers because you will close the transaction faster than your competitors.
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Understanding Historical Mortgage Rates
Mortgage rates over time fell to historic lows in 2020 and 2021 during the COVID pandemic. Early in 2021, low mortgage rates (about 3%) led to a spike in inflation. In response, the Fed hiked rates, which, by late 2023 had risen to over 8%.
Since Freddie Mac began tracking rates in April, 1971, the median 30-year mortgage rate has been 7.41%. Mortgage rates change frequently, but past trends can help borrowers determine the best time to refinance their mortgage or buy a property.
History of Mortgage Rates
Over the previous 50 years or more, the 30-year fixed mortgage rate has had several ups and downs. Today’s rates are not far from when Freddie Mac began tracking them, at 7.33% in April, 1971.
1970s
According to Freddie Mac’s historical data, mortgage rates were high in the 1970s. By the decade’s end, they had soared to 12% from their initial 7%. This increased the cost of borrowing money for a home and kept many baby boomers from owning one.
1980s
In the 1980s, interest rates reached their peak in modern history. As per the Freddie Mac data, it rocketed to around 18.63% in 1981 and then the fixed mortgage rates declined. By the decade’s end, rates had fallen to 10% or less.
The Department of Housing and Urban Development (HUD) reported that the median cost of a home in the United States in the 1980s was $63,700. Additionally, the median home price increased to $123,900 by 1990.
1990s
30-year fixed mortgage rates in 1990 were 9.83% at the beginning of the decade and 8.06% at the end. In the 1990s, double-digit mortgage rates finally decreased.
Those who previously could not afford a home were able to purchase one now with more favorable lending terms. Moreover, the mortgage market began to undergo a significant shift 1990-onwards, with the rise of fixed-rate mortgages.
2000s
Y2k saw mortgage rates decline from 8.64% to the upper 5% range in 2003. In January 2000, 30-year fixed mortgage rates was 8.15%. By mid-2003, the rates were around 5%, after which the Great Recession began in 2008.
The economy suffered from the housing crash, which is why the Fed cut interest rates. As a result, banks were able to borrow money and support the housing market by offering low mortgage rates (roughly 5% by 2009).
2010s
Mortgage rates in the 2010s exhibited a significant decline. They began at around 5% but benefited from Federal Reserve intervention aimed at economic recovery. They kept going downhill, reaching a low of 3.5% by the middle of 2012.
Rates averaged 3.98% in 2013, largely due to the bond market. After reaching historic lows of around 3.6% in 2015, mortgage rates exhibited a gradual upward trend. They settled at 3.7% by 2020.
2020
The average 30-year fixed mortgage rate was approximately 3.7% in January 2020. Covid-19 hit soon after, and the Federal Reserve responded by lowering the federal funds rate from 0.25% to 0%. This also decreased other short and long-term rates.
According to Freddie Mac, the average 30-year home loan mortgage rate was 2.68% by December 2020. The Covid years saw mortgage rates fluctuate between 2.68 % and 3.12%. However, since March 2022, the Fed has been raising rates to decrease the amount of money in the economy.
Historical Mortgage Rates Chart by Decade
This chart tracks mortgage rates over the past 50 years. Rates peaked in the 1980s at 18.63%, then dipped to historic lows of 2.65% in the early 2020s.
| Years | Minimum Interest Rate | Maximum Interest Rate | Average Interest Rate |
| 1971-1979 | 7.23% | 12.9% | 8.89% |
| 1980-1989 | 9.03% | 18.63% | 12.82% |
| 1990-1999 | 6.49% | 10.67% | 7.88% |
| 2000-2009 | 4.71% | 8.64% | 6.18% |
| 2010-2019 | 3.31% | 5.21% | 4.03% |
| 2020-Present | 2.65% | 7.79% | 3.51% |
Source: US News
Historical Mortgage Interest Rates and Refinancing
High rates in the 1970s and 1980s made it difficult to purchase a home in those early years. The rates began to decline in the 1990s and kept going down until they reached about 5% in the 2000s.
In the 2010s, the housing crisis contributed to another decline in rates, which dropped in 2015 to 3.6%. This made refinancing very alluring.
However, rates increased in 2024 and are expected to surpass 7%. Therefore, even though refinancing might have been a wise choice in the past, it might not be as advantageous now.
How Do Historical Mortgage Rates Affect Home Purchases?
Mortgage rates have historically directly affected home purchases. For buyers, lower rates, such as those in the 1990s and early 2010s, are best. They result in reduced monthly payments, which incentivize home ownership.
Better affordability results in an increase in home purchases. Conversely, excessive rates like those of the 1970s, and more recently in 2024, hinder people from buying a house.
Historical Mortgage Rates and the Current Market
Over the years, mortgage rates have experienced significant fluctuations, making for interesting developments in the housing market. It was difficult to own one in the 1970s and 1980s but much easier in the early 2020s. rates have risen again in 2024. It’s crucial to understand the effect of mortgage rates on homeownership budget.
Use a mortgage calculator to estimate how today’s rates might affect your monthly payments and overall loan costs. This tool can help you gauge affordability and plan your home-buying strategy effectively.
Further, with the help of Houzeo, you can navigate the current mortgage market and find the best rate for your circumstances. We’ll connect you with competitive lender options, ensuring you get the most affordable mortgage.
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Frequently Asked Questions
How do historical rates affect home buying today?
Historical mortgage rates affect homebuying by influencing buyers. The home-buying market thrives on low mortgage rates. Conversely, high rates, like those in the 70s, act as a check on the market.
What is refinancing and how does it relate to historical rates?
Getting a new mortgage with a lower interest rate on your current home loan is known as refinancing. For homeowners, refinancing becomes appealing when historical rates are low, as they were in the 2010s since it can drastically lower monthly payments.
How can I find the best mortgage rate today, even with higher rates?
Even though rates are higher right now, Houzeo can guide you through the market to find the best rate for your circumstances. Through its network of lenders, we help you find the most economical choice for your situation.
