Mortgage Rates History

Mortgage rates have fluctuated dramatically in the last 50 years of recorded data by Freddie Mac. And while rates have increased significantly this year, averaging more than 5%, it still pales in comparison to the spikes in the early 1980s when the 30-year fixed rate exceeded 18%.

Rates are often a reflection of what’s happening in the U.S. economy. What triggers a drop or hike in mortgage rates is usually a combination of several factors: The U.S Treasury bond market, the mortgage market, inflation, monetary policy and the gross domestic product (GDP).

While it’s difficult to predict exactly where rates will land, some signs can help us make an educated guess. History can also offer some perspective on where rates might be headed. Here’s a snapshot of what rates looked like from the 1970s until today.

A Look at Historical Mortgage Rates

Mortgage Rates in the 1970s

Mortgage rates started high at the beginning of the 1970s, around 7.3%, according to Freddie Mac’s historical data. Plagued by high inflation and the costly economic impact of the Vietnam War, average mortgage rates reached 12.9% by 1979.

There are some parallels between mortgage rates in the 1970s and today—a combination of high inflation and large government spending due to the Covid-19 pandemic.

“The pandemic now combined with the military conflict in Ukraine has roiled supply chains and [the] cost of oil, driving inflation to the highest levels since the 1970s and 80s,” says Kevin Fagan, head of commercial real estate economic analysis at Moody’s Analytics.

However, Fagan says there are key differences between the economy of the 1970s and today, which has helped stave off the higher rates seen 50 years ago.

“Demand is a major part of current inflation, with household savings rates and consumer spending that have been much stronger coming out of the 2020 pandemic than for households in the early 70s,” he says.

Mortgage Rates in the 1980s

The 1980s was the most expensive decade for mortgage borrowing largely due to consistently high inflation. By late 1981, mortgage rates averaged more than 18%, an astronomical price compared to today’s standards.

Paul Volcker, the chairman of the Federal Reserve Board from 1979 to 1987, had the uphill task of rescuing the economy from “stagflation,” a term used to describe stagnant growth and high inflation.

Volcker’s monetary policy of focusing on bank reserves and limiting the money supply pushed the country toward a recession that lasted from 1980 until 1983. Inflation fell to 3.2% in 1983, from an all-time high of 13.5% in 1980, and the economy rebounded. Mortgage rates began falling in 1982, ultimately dropping to 9.78% by the end of the decade.

Mortgage Rates in the 1990s

Mortgage rates popped and fizzled in the 1990s, but they remained in the single-digit range from late 1990 throughout the decade. Inflation was contained, which helped keep rates on a downward slope.

By the end of 1999, the average rate on a 30-year fixed mortgage was 8.06%, more than two percentage points lower than at the beginning of the decade when rates were hovering around 9.83%.

Mortgage Rates in the 2000s

At the start of the 2000s, mortgage rates averaged around 8% and then gradually fell to a range of 5% to 6% for most of the decade.

This was also a significant decade for mortgage rates because of the 2008 financial crisis, causing the Federal Reserve to slash its federal funds rate to near 0 to make borrowing more affordable. By the end of 2009, the average rate on a 30-year fixed mortgage was around 5.14%.

Mortgage Rates in the 2010s

After the housing crisis, which caused an estimated six million people to lose their homes to foreclosure, mortgage rates stayed low. For years following the crisis, home prices declined through early 2012 and then slowly began to rise.

Housing demand was also very weak as the homeownership rate fell for more than a decade, from 2004 through 2016. Low demand was a big factor in keeping mortgage rates down—reaching a decade-low of 3.35% in May 2013.

Mortgage Rates in the 2020s

While the early 2000s ushered in remarkably low mortgage rates, the early 2020s courted even lower rates. In response to the Covid-19 pandemic, the Federal Reserve pumped money into the economy, spending trillions of dollars on mortgage-backed securities to help steer the U.S. away from another financial crisis. This move allowed lenders to offer rock-bottom interest rates, tumbling to the mid-2% range by the summer of 2021.

However, supply-chain issues and inflation were indirect catalysts to a jump in mortgage rates in the spring of 2022. The sudden rise in rates has aggravated an already overheated housing market, battling low supply, high demand and rapidly increasing prices.

Related: Mortgage Interest Rates Forecast

Will Today's Mortgage Rates Continue to Climb?

As economic concerns continue, most experts agree that rates will not drop anytime soon.

“Where things head from here really comes down to inflation and whether or not the market continues to settle in at these rate levels,” says Robert Heck, vice president of mortgages at Morty, an online mortgage marketplace.

“If inflation were to spiral out of control and spur the Fed to take even more aggressive action, rates could rise to a level that could send demand and affordability into a steeper downward spiral than the decrease we’re seeing currently,” Heck says. However, “current market indicators are not projecting interest rate levels in the next ten years to reach a level that would send mortgage benchmarks above 7%.”

There have been murmurs of a recession which could dampen rate growth. As the Fed continues to raise interest rates, the economy could begin to slow down, as it’s done in the past.

“If we have an unexpected event that shocks the economy into a serious slowdown, we could see demand fall, which may then lead the Fed to stop increasing rates,” says Damon Winter, a financial planner at OnMark Asset Management. “It’s even possible they could reverse course and reduce rates to bring the economy out of a recessionary period.”