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.
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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)
Here’s how the past 53 years of mortgage rates history looks on a chart:
Mortgage rate trends then and now
In this section, we provide a brief overview of the trends that stood out in mortgage rates history.
Mortgage Rates in the 1970s – average rates of 7.38% to 11.20%
At the beginning of the decade, homeowners paid mortgage interest rates of around 7.38% to buy a home, but by the decade’s end, the rate had jumped to 11.20%! What caused the change? The oil embargo in 1973 led to rapid inflation, which collided with layoffs and wage stagnation to cause what economists call “stagflation.” The result? Mortgage rates that reflected lender’s risk.
Mortgage rates in the 1980s – average rates of 13.74% to 10.32%
In an attempt to curb inflation that continued from the 1970s into the 1980s, the Federal Reserve adopted a tight monetary policy at the beginning of this decade. Mortgage rates climbed higher after the Iran crisis in the late ‘70s, and high unemployment rates contributed to bank’s reluctance to lend.
Mortgage rates in the 1990s – average rates of 10.13% to 7.44%
Potential homeowners could finally breathe a sigh of relief in the ‘90s. The country entered into a peaceful period after the Vietnam War of the 1970s, the Iran crisis, and the Gulf War of the 1990s. Inflation rates fell from over 5% to around 2% over the decade.
Mortgage rates in the 2000s – average rates of 8.05% to 5.04%
Mortgage rates spiked again at the beginning of the 2000s before falling to a rate not seen since Freddie Mac began tracking them. The 2008 financial crisis, caused by low interest rates, subprime mortgages, and inadequate regulation, spurred the Federal Reserve to temporarily cut the Fed Funds Rate to zero. By the end of the decade, as the country recovered from the crisis, they rose again.
Mortgage rates in the 2010s – average rates of 4.69% to 3.94%
It took more than a few years to recover, however. Demand for housing remained low during the 2010s and continued declining. At the beginning of 2010, 69.1% of all Americans owned a home. That dipped as low as 62.9% in 2016, before ending the decade at 65.1%. Lower demand kept mortgage rates low as lenders tried to entice buyers into the market.
Pandemic-era rates (2020-2022) – average rates of 3.11% to 5.34%
Rates fell even lower in 2020 with the arrival of the COVID-19 pandemic. Leyba says that lower interest rates gave people incentives to purchase, “putting them in positions where initially, with interest rates before, they were unable to buy at specific price points, now they had flexibility and opportunity.”
The Federal Reserve kept interest rates low and also tried to stimulate demand by purchasing mortgage-backed securities. Banks, reassured that they could bundle their mortgages and sell them to the Fed, kept lending.
Despite these efforts, inflation rose sharply in 2022 and 2023, aggravated by supply-chain issues and the war in Ukraine. This led, indirectly, to a steady rise in mortgage rates, with 2022 capped off with a 30-year fixed rate of 6.42%.
Current interest rate trends (2023-2024) – sliding down from 6.8%
In 2023, the 30-year fixed mortgage rate averaged 6.8%. Since hitting its 23-year high of 7.79% in October, rates finally started declining to rates that are lingering just under 6.5%, according to Freddie Mac.
As the Fed becomes more confident that inflation is slowing, it is more comfortable cutting its benchmark federal funds rate, which will typically lower mortgage interest rates in the U.S. As of this posting date, the 30-year fixed rate had fallen to 6.46% and was trending downward.
Will rates continue to drop? (2025 – beyond predictions)
While local markets vary, in general, most industry experts believe that with rate cuts in sight, mortgage interest rates will continue to pull back in through the end of 2024.
Looking ahead, the Mortgage Bankers Association and Fannie Mae both predict interest rates on a 30-year mortgage will drop to 5.9% by the end of 2025.
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Is now a good time to buy a home?
Due to a lack of housing inventory, buyers are still facing record-high home prices. Leyba says prices and the impact of inflation have wielded a one-two punch at many home shoppers. “The biggest challenge is that, with high interest rates and high home prices, it makes it far more challenging to fit a first-time homebuyer.”
However, as mortgage rates have been sliding downward, market analysts say we’re seeing a slow shift away from a sellers’ market and moving closer to a buyer’s market. This will likely improve buying conditions for many Americans. However, experts warn that the market may still experience a bumpy road.
Since market conditions vary by city, state, and town, it’s always a good idea to speak to an expert agent in your area to get a feel for the local market. If you’re looking to buy soon, here are some tips.
- Get pre-approved for a mortgage: That way, you’ll know your budget.
- Save a larger down payment: With a larger down payment, you’ll pay less interest over time. Plus, it makes your offer more attractive to sellers.
- Shop beneath your maximum price: This can help you avoid becoming “house poor” if you spend all of your savings while purchasing your home.
Is now a good time to sell a home?
As 2024 winds down and consumers step into 2025, many real estate experts think it will be a good time to sell a home because of the ongoing housing shortage and high buyer demand.
In the historical ebb and flow of interest rates and home prices, homebuyers and sellers will experience high and low tides. If you’re concerned about how fluctuating mortgage rates could impact your buying or selling experience, talk to an experienced agent today.
HomeLight partners with top-rated real estate agents across the country. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
Writer Dena Landon contributed to this story.
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