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Graph of mortgage rate history since 1971

History of Mortgage Rates

There are many factors that affect mortgage rates including economic events, inflation, the rate of economic growth, Federal Reserve policies, and more. Despite the most recent increases in mortgage rates, they are still relatively low compared to the fluctuations that have occurred in the past. For those looking to purchase a home in the current market, it’s important to take appropriate steps to ensure you have the best chance at winning the tight competition in today’s sellers’ market. Our article How to beat a cash offer will hopefully help you get a leg up on the competition, but to get a better understanding of how mortgage rates have changed over time, we’ll kick it off from the 1970s. 

1970’s, 80’s & 90’s 

Back in 1971, Freddie Mac started gathering data as they surveyed lenders and has become the main source for mortgage rates ever since. The information we discuss here is based on the data gathered from Freddie Mac on 30-Year Fixed-Rate Mortgages. Beginning in the 1970’s rates settled in around the mid-7% range. Over the years they would increase and decrease, eventually climbing to just over 11% by the end of the decade for the annual average.  

Moving right along into the 1980s, the US had gone into a recession and the prices of goods and services increased rapidly. In an attempt to counteract the inflation that was taking place the Federal Reserve raised interest rates. During this time, mortgage rates again shot up and hit an all-time high of 18.45% in October 1981, with the average being around 16.63%. 

With inflation settling down in the 90s, the average mortgage rate dipped down to 10.13% and continued to decline throughout the decade. With technological developments advancing, economic growth increased as larger investments were being made for research and development. 

Early 2000’s  

Following the rise of investments in technology stocks due to the speculative increase in internet-based businesses (also known as the tech bubble) and the economic trauma in 2001, the Federal Reserve stimulated the struggling U.S. economy by cutting interest rates to historically low levels. By this time interest rates for mortgages began to average out around the high 5-6% range.  

With the economy now booming, the increased demand for homes and subsequently, mortgages also grew. However, the housing boom that ensued led to record levels of homeownership in the U.S. This caused problems for banks and mortgage companies who had difficulty finding new homebuyers. 

During the early 2000s, mortgage lending took a turn for the worse. It became a normal practice for banks and mortgage companies to lend to borrowers with poor credit scores who didn’t have the means to qualify for a traditional mortgage- also known as subprime mortgages. Additionally, the demand for packaged mortgage loan-related investments (Private-Label Securities Market) grew. These types of loan investments are not backed by the government entities such as Freddie Mac or Fannie Mae and therefore cannot guarantee that investors are paid, unlike government-backed loan options.  

Lenders needed to offer more loans to buyers to meet the demands from investors, therefore, the trend of offering risky subprime loans to under-qualified buyers continued. While many of these subprime loans appeared to be a good bet for buyers, many of these loans became unaffordable over time. Still, this easy access to financing caused the housing market to expand, leading to high rates of homeownership and competition for available housing in many markets. 

After-effects of the Housing Market Crash 

The housing crash in 2008 can be attributed to a combination of highly risky loan products, predatory lending practices, and lack of regulations in place. Because of the highly common subprime lending practices, borrowers found themselves underwater, owing more on their homes than what they were worth. Following this market crash, strict regulatory practices were put into place. These guidelines are still in place today and are always in consideration to avoid any continuation of predatory lending, which resulted in the subprime mortgage crisis that country is recovering from slowly. It is important for buyers to understand the depth of the mortgage information available in order to decide on loan programs that best fit their individual needs. That’s why it is highly important for borrowers to consult with a mortgage advisor even before they start looking for their next home. By educating the buyer on important mortgage information and regulations, the lender will be able to ensure the stability of the mortgage market over the coming years. 

Changes since the Real Estate Market Crash: 

  • Safer Loan Options 
  • Extensive Documentation 
  • Credit Score Requirements 
  • Digital Mortgages 

Pandemic Mortgage Rates/ Post Pandemic Fallout 

We had nearly two years of record-low mortgage rates which steadily lowered from the mid-high 3% range and hit an annual average of 2.96% by December 2021. Last year, 2022 started off with rates beginning to rise to levels that we haven’t seen since before the pandemic with the average jumping up to 6.31% by the end of the year which has been relatively normal based on past data. As 2023 progresses, mortgage rates have continued to trend upward leaving would-be homebuyers in a tight spot.

Although volatile, mortgage rates and the price of homes have continued to rise. That means the rate you might be quoted one day could be significantly different than the one you get the next. Experts caution against trying to time the market to get the best rate, so if you believe now is the right time to become a homeowner and you feel you’re well prepared, it’s important to speak to a mortgage expert to focus on your home buying budget and stick with a payment you can afford. It’s also important to keep in mind that real estate is local — the housing market where you want to buy a home may not precisely follow the trends that are nationwide. Working with a local mortgage lender is just as important as finding a local Realtor.

Contact a Mortgage Expert to help finance your home buying needs!  


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