Historical Mortgage Rates Trends to Learn From

Read Time: 3min
Last Updated: 9/11/2021

Whether buying a home for the first time or refinancing your current mortgage, current interest rates play a big role and so can historical mortgage rates. A popular saying among stock traders is “past performance is not indicative of future results,” and the same can not be said for interest rates. Let’s take a look at historical mortgage rates from Freddie Mac to see what there is to learn.

Historical Mortgage Rates: The 1970s

The 1970s were a fad happy time most commonly known for disco and bell-bottoms. While everyone was supporting the village people and listening to “YMCA,” interest rates were hard at work. Because the 1970s saw some of the highest inflation rates, many people were priced out of new homes. In 1971, interest rates were in the mid to upper 7 percent. Slowly but surely, interest rates climbed in the ’70s and reached a peak of 12.90 percent in December 1979.


Historical Mortgage Rates: The 1980s

A new decade started, but the issues of the past were still there. Inflation was increasing at an unprecedented rate. To counteract hyperinflation, the Federal Reserve raised short-term interest rates. This was done to increase the dollar’s buying power, but it also increased the cost of borrowing money. With interest rates on the rise, in 1981 the annual average interest rate was 16.63 percent. Rates declined from there; however, the decade came to end with rates still high at 10 percent. This is very different from what we are currently experiencing.


Historical Mortgage Rates: The 1990s

In May of 1990, interest rates were the highest the ’90s would see at 10.48 percent. If you were applying for a mortgage in October 1993, you would be looking at interest rates as low as 6.83 percent. As inflation started to calm down, the 1990s saw an average interest rate of 8.11 percent. This is also when the 10-year treasury and mortgage rates came into play to pay down Federal debt.


Historical Mortgage Rates: The 2000s

In May of 2000, interest rates were as high as 8.52 percent before they slowly declined until 2003. From 2003-2008, interest rates spanned an average of 6.09 percent. Then, in 2008, the housing crash happened, leaving homeowners owing more on their home than the property was worth. Hoping to provide some temporary relief and stimulate the economy, the Federal Reserve cut interest rates to make borrowing money cheaper. Short-term rates––rates at which financial institutions borrow money––were dramatically reduced to nearly 0 percent. This made it affordable for banks to borrow funds so they could keep mortgage rates reasonable. As a result of this change, mortgage interest rates fell almost a full point averaging 4.86 percent over the next several years.


Historical Mortgage Rates: 2010-2020

Mortgage rates came into the new decade at 5.03 percent. But 2013 had its problems and rates increased. Referred to by some as “The ‘Great Bond Massacre’ of 2013,” this is when the Federal Reserve stated that they would stop buying as many bonds causing interest rates to increase. 2014 and 2015 saw rates average 4.01 percent, which was slightly higher than 2016’s average of 3.65 percent. 2017 saw an average of 3.99 percent and, aside from a higher interest rate in 2018, we have continuously watched interest rates slowly but surely decrease until reaching 2.68 percent in December of 2020.


Historical Mortgage Rates and Your Home Purchase

Simply put, reasonable mortgage interest rates encourage homebuyers to take action. Low rates mean less money spent monthly and for the entirety of the loan. Historical mortgage rates show that when rates are down, people purchase homes.

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A mortgage loan is determined by how much money you can borrow. Because low interest rates save you money, you may be able to afford a little more and find the home of your dreams. Take a look at our most frequently asked mortgage questions for answers about the home lending process today!

Maggie joined the Wyndham Capital Mortgage team in November 2020 as a Content Strategist. She has more than six years of content creation experience, which includes launching WBTV’s digital brand Queen City Weekend (now QC Life) and garnering more than 1.1 million page views across her articles. With a love of storytelling, she hopes to bring that passion to WCM and the many families it serves. She resides in Charlotte, North Carolina, and can often be found at a coffee shop, latte in hand.

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