Bill and Penny are recently married and looking to start a family. Their largest goal in mind, buying their first home. They go to their local bank and to their dismay, find that the 30-year rate is 6.625% (actual rate will vary by bank and location). Just three years ago, the same rate was 2.65%. On a $250,000 mortgage loan, their monthly payment would be $1,600.78, almost 600 dollars more expensive than it would have been for the same exact loan in 2021. With this in mind they think to themselves, “Has it always been this hard to buy a house?”
With the interest rate hikes over the last couple of years, there has been a general concern over mortgage rates specifically. With high home prices to match, the sudden jump in mortgage rates have made home buying even more difficult. Despite this, rates as they are, are not abnormal. Historically, mortgage rates have often been much higher than what they are today. People feel that they are so high today just because they were considerably low in the recent decade.
Here is a breakdown of the rates we have seen over the last 50 years:
1970’s – 7.23-12.9%
1980’s – 9.03-18.63%
1990’s – 6.49-10.67%
2000’s – 4.71-8.64%
2010’s – 3.31-5.21%
2020’s – 2.65-7.79%
Similar to recent years, the 1980’s were a period of high inflation that caused rates far higher than any other decade. We are still within, and even lower, than historical mortgage rates have been over the last 50 years. It’s not much comfort to say that things are not as bad as they could be, but understanding the past helps to manage expectations in the present. For someone thinking about buying a home the fundamentals are still the same, maintain or improve your credit score, save for a sufficient down payment, work with a realtor who understands the market, and jump when the right house becomes available.
