From 1975-2008 interest rates fluctuated between 6% and 10% with the highest being almost 17% in 1981. There were some major economic and political reasons for the variations and for the really high rates.  That is not the point of this space. Policy and programs change. Rates change.  Supply and demand changes.  The desirability of a neighborhood, city and state changes. When John and I bought our first home in 1989 our interest rate was around the 11% mark.  We didn’t think anything about it then because it was the norm. Now that seems crazy.

After the 2008 real estate crash, the federal government stepped in and reduced interest rates in order to stimulate home buying because of the enormous supply of houses we had sitting. We had an inventory problem and other problems as a result of some of the economic policies of the past.  We had a flood of foreclosures in the market. Lending had been too lenient. We also had an over supply of inventory which resulted in home prices coming down.  Basic supply and demand economics. The prices were coming down so far that builders who had dozens of homes sitting on the market could not sell them for the amount that it had costs to build them so they were filing bankruptcy and fire selling houses.

Eventually we started leveling and absorbing the inventory.  Prices stabilized. Then the pandemic hit. People who were trapped at home, working from home, home schooling children, etc decided that their home didn’t meet their needs.  Combined with economic stimulus money from the government and millions of millennials deciding that it is time to buy their first home, we found ourselves in a housing shortage. At the same time, interest rates were falling, and the home buying dollar was going further. House prices went up with interest rates down. The problem that surfaced was very limited inventory. We were in a market that heavily favored the seller.  Millions of buyers were desperate to buy, yet there were not enough houses to buy. So, we entered very unchartered territory: houses on the market for only hours, multiple offers, bidding wars, and outrageous concessions and negotiating terms. Buyers were paying above list price and above the appraised value. They were forgoing inspections and putting down tons of cash. I had 26 offers on one house in the first 2 days.  Agents and their buyers were lined up in the yard and driveway to see the house.

Currently, the market is changing again. Just when we figured out how to navigate one market, it changed again. Interest rates are climbing. Inventory is increasing. Buyers have more choices of homes, but prices and rates both seem high. Although when we study the history of rates, they are not as high as they could be. Sellers who want to sell now need to offer concessions to the buyers to encourage buyers to make offers. Very unlike where we were just a few months ago.

30-year fixed-rate mortgage trends over time

For some perspective on today’s mortgage interest rates, here’s how average 30-year rates have changed from year to year over the past five decades.

Year	Average 30-Year Rate	Year	Average 30-Year Rate	Year	Average 30-Year Rate
1975	9.05%	1991	9.25%	2007	6.34%
1976	8.87%	1992	8.39%	2008	6.03%
1977	8.85%	1993	7.31%	2009	5.04%
1978	9.64%	1994	8.38%	2010	4.69%
1979	11.20%	1995	7.93%	2011	4.45%
1980	13.74%	1996	7.81%	2012	3.66%
1981	16.63%	1997	7.60%	2013	3.98%
1982	16.04%	1998	6.94%	2014	4.17%
1983	13.24%	1999	7.44%	2015	3.85%
1984	13.88%	2000	8.05%	2016	3.65%
1985	12.43%	2001	6.97%	2017	3.99%
1986	10.19%	2002	6.54%	2018	4.54%
1987	10.21%	2003	5.83%	2019	3.94%
1988	10.34%	2004	5.84%	2020	3.10%
1989	10.32%	2005	5.87%	2021	2.96%
1990	10.13%	2006	6.41%	2022	5.34%

Source: Freddie Mac

Find your lowest mortgage rate. Start here (Sep 25th, 2023)

Will mortgage rates go back down?

Extremely high prices and an overall strong economy have led the Federal Reserve to take drastic measures, implementing a rapid succession of rate increases unseen since the early 1980s.

These measures have involved four historic rate hikes of 75 basis points (0.75%), executed in June, July, September, and November of 2022. Although fixed mortgage rates are not controlled by the Fed, their actions have undeniably contributed to a significant upward push in these rates.Find your lowest mortgage rate. Start here (Sep 25th, 2023)

In December 2022, the Federal Reserve made the decision to dial down the pace of interest rate hikes, cutting the fed funds rate by only 50 basis points (0.50%). This trend of dialing back has persisted into 2023, evidenced by four adjustments of 25 basis points (0.25%) in January, March, May, and late July. As a result, the current federal funds rate now sits in a range of 5.25% to 5.50%.

The Fed’s softer rate hike can help mortgage rates to remain near 6.5 percent. With inflation easing slowly but steadily, rates will gradually move down in the following months.— NADIA EVANGELOU, SENIOR ECONOMIST AND DIRECTOR OF REAL ESTATE RESEARCH AT THE NATIONAL ASSOCIATION OF REALTORS

As we navigate the second half of 2023, forecasting the precise trajectory of mortgage rates has become increasingly difficult. However, housing market watchers foresee persistently high mortgage rates amid economic uncertainty and the Federal Reserve’s anti-inflation rate hikes.

Many are speculating about where rates will go in the next year or two. Some forecasting models predict that mortgage rates will average 5.00% in 2024, dropping to 4.00% in 2025. Whether this scenario unfolds remains uncertain, but it would certainly come as a significant relief for buyers.

As a borrower, it doesn’t make much sense to try to time your rate in this market. Our best advice is to buy when you’re financially ready and can afford the home you want — regardless of current interest rates.

Remember that you’re not stuck with your mortgage rate forever. If rates drop significantly, homeowners can always refinance later on to cut costs.

Historic mortgage rates: Important years for rates

The long-term average for mortgage rates is just under 8 percent. That’s according to Freddie Mac records going back to 1971. But mortgage rates can move a lot from year to year. And some years have seen much bigger moves than others.

Let’s look at a few examples to show how rates often buck conventional wisdom and move in unexpected ways.Find your lowest mortgage rate. Start here (Sep 25th, 2023)

1981: The all-time high for mortgage rates

1981 was the worst year for mortgage interest rates on record.

How bad is bad? The average mortgage rate in 1981 was 16.63 percent.

• At 16.63%, a $200,000 mortgage has a monthly cost for principal and interest of $2,800
• Compared with the long-time average that’s an extra monthly cost of $1,300 or $15,900 per year

And that’s just the average — some people paid more. For the week of Oct. 9, 1981, mortgage rates averaged 18.63%, the highest weekly rate on record, and almost five times the 2019 annual rate.

2008: The mortgage slump

2008 was the final gasp of the mortgage meltdown. Real estate financing was available in 2008 for 6.03%, according to Freddie Mac.

• The monthly payment for a $200,000 mortgage was about $1,200, not including taxes and insurance

Post-2008, rates declined steadily.

2016: An all-time low for mortgage rates

Until recently, 2016 held the lowest annual mortgage rate on record since 1971. Freddie Mac says the typical 2016 mortgage was priced at just 3.65 percent.

• A $200,000 mortgage at 3.65% has a monthly cost for principal and interest of $915
• That’s $553 a month less than the long-term average

Mortgage rates had dropped lower in 2012, when one week in November averaged 3.31 percent. But some of 2012 was higher, and the entire year averaged out at 3.65% for a 30-year mortgage.Find your lowest mortgage rate. Start here (Sep 25th, 2023)

2019: The surprise mortgage rate drop-off

In 2018, many economists predicted that 2019 mortgage rates would top 5.5 percent. That turned out to be wrong. In fact, rates dropped in 2019. The average mortgage rate went from 4.54% in 2018 to 3.94% in 2019.

• At 3.94%, the monthly payment for a $200,000 home loan was $948
• That’s a savings of $520 a month — or $6,240 a year — when compared with the 8% long–term average

In 2019, it was thought mortgage rates couldn’t go much lower. But 2020 and 2021 proved that thinking wrong again.Compare mortgage and refinance rates. Start here (Sep 25th, 2023)

2021: The lowest 30-year mortgage rates ever

Rates plummeted in 2020 and 2021 in response to the Coronavirus pandemic. By July 2020, the 30-year fixed rate fell below 3% for the first time. And it kept falling to a new record low of just 2.65% in January 2021. The average mortgage rate for that year was 2.96%. That year marked an incredibly appealing homeownership opportunity for first-time buyers to enter the housing market. It also resulted in a surge in refinancing activity among existing homeowners.

• At 2.65%, the monthly payment for a $200,000 home loan is $806 not counting taxes and insurance
• You’d save $662 a month, or $7,900 a year, compared to the 8% long-term average

However, record-low rates were largely dependent on accommodating, Covid-era policies from the Federal Reserve. Those measures were never meant to last. And the more U.S. and world economies recover from their Covid slump, the higher interest rates are likely to go.Check your mortgage eligibility. Start here (Sep 25th, 2023)

2022: Mortgage rates spike

Thanks to sharp inflation growth, higher benchmark rates, and a drawback on mortgage stimulus by the Fed, mortgage rates spiked in 2022.

According to Freddie Mac’s records, the average 30-year rate jumped from 3.22% in January to a high of 7.08% at the end of October. That’s an increase of nearly 400 basis points (4%) in ten months.

As the year concluded, the average mortgage rate went from 2.96% in 2021 to 5.34% in 2022. Although, if the Fed gets inflation in check or the U.S. enters a meaningful recession, mortgage rates could come back down somewhat.Find your lowest mortgage rate. Start here (Sep 25th, 2023)

2023: Mortgage rates and tug-of-war with inflation

As the Federal Reserve continues its battle against inflation and edges closer to reaching its 2% target, mortgage rates have continued to indirectly climb higher. Since the Federal Reserve began its rate hikes in March 2022, the benchmark interest rate has risen 5 percentage points.

According to Freddie Mac’s records, the average 30-year rate reached 6.48% during the initial week of 2023, increasing steadily to eventually land at 7.18% in early September.

The question arises: where will mortgage rates ultimately settle later this year? As we approach the September Fed Meeting, signs suggest there might be one more quarter-point rate hike, possibly the last for a while. If the Fed indeed stops raising rates, we could see mortgage rates go below 7% in early 2024. We’ll have to wait and see.Find your lowest mortgage rate. Start here (Sep 25th, 2023)

Remember that average mortgage rates are only a general benchmark. If you have good credit and strong personal finances, there’s a good chance you’ll get a lower rate than what you see in the news. So check with a lender to see what you qualify for.Time to make a move? Let us find the right mortgage for you (Sep 25th, 2023)