What is the History of Mortgage Rates?

In the history of mortgage rates, we are seeing unprecedented lows, meaning right now is the best time to step in on the action. 

For the homebuyer, it’s a great time to buy or refinance your home and capitalize on these historic low rates. Today we’ll cover what a mortgage rate is, the history, and why it matters to you.

What Are Mortgage Rates?

A mortgage rate simply refers to the rate of interest charged on a mortgage loan. These rates can be fixed or variable. A fixed rate means that the interest rate does not change during the term or length of the mortgage loan, while a variable rate fluctuates over the course of the loan, based on the benchmark rate of interest. The terms of the mortgage loan are set by the lender, and the interest rate can vary depending on factors like the borrower’s credit profile. Mortgage rates have a major effect on the final price a borrower pays for their home. Mortgage loans generally follow an amortization schedule, in which a greater amount of each monthly payment goes toward the interest of the loan. The lower the rate, the less interest you’ll pay over the course of the loan, potentially saving thousands of dollars. Mortgage rates have fluctuated pretty dramatically over the course of the last 30 years, as you’ll see.

History of Mortgage Rates

Looking back on the past thirty years of mortgage rates adds some perspective to today’s current rates. In 1971, when lenders began to be surveyed by Freddie Mac, 30-year fixed-rate mortgage rates were between 7.29% to 7.73%. Following the trends in inflation, these rates had grown to 9.5% beginning in 1981. As the Federal Reserve sought to keep pace with inflation rates, mortgage rates were pushed to an all-time high of 18.63% by one point in 1981! From there, they dropped back down to the single digits by 1982, where they remained for the next twenty years. In November of 2012, rates dropped to what was then the lowest in history, 3.31%. While those rates were historically low, the current housing market has seen rates drop to an even lower rate, hitting an unprecedented 2.67% as of December of 2020.

What Does This Mean for the Homebuyer?

To put into perspective what a difference a mortgage rate can make on your mortgage loan, let’s take a look at a sample loan. A $100,000 30-year fixed-rate mortgage loan with an interest rate of 18.63% (as in 1981’s all time high), with a downpayment of $20,000 could mean a monthly payment of over $1,700! The same loan with an interest rate of 2.67%, the lowest rate as of December 2020, would mean a payment of just $785. Those kind of numbers have a huge effect on your wallet, illustrating the benefits of locking into today’s low mortgage rates. If you’ve considered buying a home, there’s never been a better time.

How Bob Buys Houses Can Help

The history of mortgage rates shows that it’s a seller’s market, especially in Utah, but it can still take time to sell your house. Timing is crucial to lock into today’s low rates, and Bob Buys Houses can help you sell your home for cash in as little as seven days. Contact us with your information for a free, no-obligation offer, and see what your options are today! We buy houses across Salt Lake County.

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