How Do Today’s Mortgage Rates Compare with History?

Until recently, it’s likely you’ve seen news headlines declaring, “Mortgage interest rates hit a 23-year high.” Fortunately, rates have finally started to drop from their October peak of nearly 8%, but how do today’s rates compare with what our parents and grandparents paid? What can be found in the bigger picture of mortgage rates history in the United States?

A moment of reflection can be helpful if you’re trying to decide if now is a good time to buy. Or perhaps you have a mortgage that you refinanced during the pandemic-era low rates, and you’ve been waiting for the right time to make a move.

Jerome Leyba is a top-rated real estate agent in New Mexico who sells homes 32% faster than average agents in his Santa Fe region. He explains that there’s a natural ebb and flow to the market, “Interest rates go up, the market slows, they go down a little bit, and the market speeds back up.”

Let’s take a brief look at the economic factors that make rates go up or down. You may find things aren’t as bad as the headlines might lead you to think.

What causes mortgage rate fluctuations?

The Federal Reserve, inflation, and recessions have caused mortgage rate fluctuations throughout history — but how? Think of each of these factors as pieces of a puzzle that, when combined, give some context to the average mortgage rate of a particular time period.

Federal reserve

The Federal Reserve controls the country’s monetary policy. The primary goals of this government entity are to maintain stable prices and employment, and to set long-term interest rates. The Fed determines the rate at which banks will lend money to each other by setting what is called the federal funds rate. Maintaining stable prices means combating excessive inflation — the Fed will raise the federal funds rate to reduce the rate of inflation, and these higher rates are then passed onto consumers.

Inflation

Inflation occurs when prices rise, and your dollar doesn’t go as far — i.e. the grocery cart that cost $100 two weeks ago now costs $120, but you still only have $100 to budget for groceries. In response to growing inflation, interest rates rise across the economy to discourage unnecessary consumer spending. Demand for mortgage-backed securities drops, further causing rates to rise.

Bond market

Investors looking for low-risk but a return on their investments often find what they’re looking for in the bond market. Bonds are debt securities issued by either the government or corporations and sold to investors.

Banks, and government-sponsored enterprises Freddie Mac and Fannie Mae, often “bundle” mortgages together in mortgage-backed securities or “MBS.” They then sell these securities to the same investors that invest in the bond market, but they have to pay investors higher rates. There’s more risk to an MBS — if consumers default on the underlying loans and foreclosures rise, the security’s value declines. A higher rate of return incentivizes investors to assume that risk.

Recessions

The National Bureau of Economic Research states that a recession is defined by, “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” Related to this, unemployment often rises during a recession, which decreases demand for mortgages. If you’re in a position to buy a home, that could be a good thing. Interest rates fall due to less demand. And, sadly, sellers facing foreclosure due to unemployment are often more motivated to sell.

The economy

All of the above factors contribute to what people generally call “the economy.” If the country is in a recession, if the unemployment rate is rising, and inflation is up, pundits will say that the economy isn’t doing well. Whether or not the economy is “doing well” directly impacts mortgage rates, as we can see when looking at past decades.

Mortgage rates history

Was it cheaper for your parents or grandparents to buy a house? Looking back through the decades, mortgage rates have fluctuated over time. The difference in mortgage rates between buying a home in the 1970s versus buying in the 1950s could literally be thousands — if not hundreds of thousands — of dollars over the life of the mortgage loan.

Here’s what you might have paid for a mortgage in past decades (and why) with data from Freddie Mac.

Mortgage interest rates 1974-2024

Year
Average 30-year rate
Year
Average 30-year rate
Year
Average 30-year rate
Year
Average 30-year rate

1974
9.19%
1987
10.21%
2000
8.05%
2013
3.98%

1975
9.05%
1988
10.34%
2001
6.97%
2014
4.17%

1976
8.87%
1989
10.32%
2002
6.54%
2015
3.85%

1977
8.85%
1990
10.13%
2003
5.83%
2016
3.65%

1978
9.64%
1991
9.25%
2004
5.84%
2017
3.99%

1979
11.20%
1992
8.39%
2005
5.87%
2018
4.54%

1980
13.74%
1993
7.31%
2006
6.41%
2019
3.94%

1981
16.63%
1994
8.38%
2007
6.34%
2020
3.10%

1982
16.04%
1995
7.93%
2008
6.03%
2021
2.96%

1983
13.24%
1996
7.81%
2009
5.04%
2022
5.34%

1984
13.88%
1997
7.60%
2010
4.69%
2023
6.81%

1985
12.43%
1998
6.94%
2011
4.45%
2024
6.1%- 6.8%*

1986
10.19%
1999
7.44%
2012
3.66%
2025
TBD

Source: Freddie Mac (*2024 estimated average range of August 27)