Historical Mortgage Rates: 1971 To The Present

Mortgage interest rates aren’t a topic you’ll likely think about much until you’re ready to take out a mortgage or refinance your current home loan. However, if you’ve recently entered the housing market and are looking to finance a home purchase, you’re probably curious about mortgage interest rates and how they’re determined.

In the past few years, mortgage rates were at or near historic lows after the Federal Reserve (Fed) lowered rates in 2020 in response to the COVID-19 pandemic. But with consumer prices trending high in more recent times, the Fed has hiked interest rates significantly to cool inflation. This has led to a rise in mortgage rates across the United States.

Although mortgage rates are always fluctuating, understanding historical interest rates and trends can help inform borrowers of the best time to buy a house or refinance a mortgage. Let’s take a look at the rise and fall of rates on the 30-year fixed-rate mortgage throughout the last several decades.

The Fed, or the U.S. central bank, raises mortgage interest rates in response to rising inflation.

The figures below come from Freddie Mac, which began tracking 30-year fixed-rate mortgage rates in April 1971:

Now that you’ve seen a snapshot of the mortgage rates at the beginning and end of each decade going back to the 1970s, let’s dive into the details. Below, we’ll discuss how the 30-year fixed mortgage rates in each decade were determined:

1970s

Thanks to Freddie Mac, there’s solid data available for 30-year fixed-rate mortgage rates beginning in 1971.

Rates in 1971 were in the 7.5% range, and they moved up steadily until they were at 10.03% in 1974. They briefly dipped into the mid- to high 8% range before climbing to 12.9% in 1979. This was during a period of high inflation that hit its peak early in the next decade.

1980s

In both the 1970s and 1980s, the United States experienced a recession caused by an oil embargo against the country. The Organization of the Petroleum Exporting Countries (OPEC) instituted the embargo. One of the effects of this was hyperinflation, which meant the price of goods and services rose extremely fast.

To counteract hyperinflation, the Fed raised short-term interest rates. This made money in savings accounts worth more. On the other hand, all interest rates rose, so the cost of borrowing money increased, too.

Interest rates reached their highest point in modern history in October 1981 when they peaked at 18.63%, according to the Freddie Mac data. Fixed mortgage rates declined from there, but they finished the decade at around 10%. The 1980s were an expensive time to borrow money.

1990s

In the 1990s, inflation started to calm down a bit. The average mortgage rate in 1990 was 10.13%, but it slowly fell, finally dipping to 6.49% in 1998.

One big reason for the economic growth and declining inflation seen later in the decade was the arrival of the internet in mainstream consciousness. The increased investment in research and development of new technologies spurred a ton of economic growth.

2000s

Mortgage rates steadily declined from 8.64% in 2000 to the high 5% range in 2003. But the housing industry growth fueled by these attractive rates was short-lived. In 2008, the economy crashed, bringing the real estate market with it, and the Great Recession began.

The housing crash continued to worsen as property values steeply declined. This left many homeowners owing more on their homes than the property was worth – a condition known as being underwater on a mortgage. To provide some relief and stimulate the economy, the Fed cut interest rates to make borrowing money cheaper.

Short-term rates, or the rates at which financial institutions borrow money, ended up being slashed to the point where they were at or near zero. This made it extremely cheap for banks to borrow funds so they could keep mortgage rates low.

As a result of this change, mortgage rates fell almost a full percentage point, averaging 5.04% in 2009.

2010s

Riding the wave of low bank borrowing costs, mortgage rates entered the new decade at around 5.09%. They continued to fall steadily and were around 3.5% by mid-2012. In 2013, rates rose to 3.98% on average due in large part to the bond market, which panicked when the Federal Reserve announced plans to stop buying as many bonds.

When fewer buyers are available, the yields on mortgage bonds must go up to attract purchasers. This also causes mortgage rates to rise. Rates increased to an average of 4.17% in 2014 and dropped to an average of 3.85% in 2015 as the market calmed down.

Although they were a little higher to end the year, rates in 2016 averaged 3.65%. With global turmoil, investors flocked to the safety of the U.S. bond market to guarantee the steadiness of their investments.

Rates began rising after the 2016 presidential election and peaked at the end of 2018 and the start of 2019. Rates on 30-year fixed-rate mortgages typically ranged between 3.49% on the low end and 4.94% on the high end.

2020 – 2023

Rates declined throughout 2019. When January 2020 came around, the average rate for a 30-year fixed-rate mortgage was about 3.7%.

Then the COVID-19 pandemic hit the United States. In response, the Fed dropped the federal funds rate to 0% – 0.25%, causing other short-term and long-term rates to drop.

This move was made to encourage borrowing of home loans and other loan types. It also led to a large increase in refinance and mortgage applications. By December 2020, Freddie Mac reported the average mortgage rate for a 30-year home loan was 2.68%.

Mortgage rates then hovered within the same range throughout 2021, but since March 2022, the Fed has been raising its rates to reduce the amount of money in the economy. The average mortgage interest rate for a 30-year fixed-rate mortgage has been above 6% throughout 2023, soaring above 7% in mid-August.

More rate hikes may be on the horizon, so expect mortgage interest rates to perhaps spike again before year’s end. This may possibility make now the best time to apply for a mortgage if you missed the window when rates were lower.

Mortgage refinancing is the process of swapping your old loan for a new one that ideally has more favorable loan terms. Homeowners can take advantage of reduced interest rates to decrease their monthly payment if rates are lower than when they made their initial purchase. This savings could go toward the principal loan balance, other debt payments or into a savings account.

A cash-out refinance is a refinancing option if you have enough equity in your home. With a cash-out refinance, you can tap into home equity you’ve built through repayment of your home loan as well as home value appreciation. You can use that money to pay off current debts or make home renovations.

If you’re thinking about refinancing, use our refinance calculator to see what your new monthly mortgage payment could be.

Lower mortgage interest rates encourage home buying. Low rates mean you’ll pay less money  in interest over the life of the loan and have a lower monthly mortgage payment.

Mortgage lenders determine how much you can borrow by comparing your income to your monthly mortgage payment and considering your overall debt-to-income ratio (DTI). With a lower monthly payment, you may be able to afford a more expensive house.

An adjustable-rate mortgage (ARM) can offer a relatively low mortgage rate starting out, but interest rates on ARMs adjust over a period of time and may eventually be much higher. However, you may be able to get into an ARM now and take advantage of a lower rate, then change the loan before it adjusts. Talk with your lender about the possibility of converting your ARM to a fixed-rate mortgage if rates go lower.

Still curious about historical interest rates? Here are the answers to some of your burning questions about mortgage rates:

What were the lowest mortgage rates in history?

The lowest historical mortgage rate ever for 30-year fixed-rate mortgages was not all that long ago. In January 2021, due largely to the effects of the COVID-19 pandemic, mortgage rates sank to an all-time low of 2.65%, according to Freddie Mac. Mortgage rates stayed low all year, with an average rate of 2.96% in 2021.

What were the highest mortgage rates in history?

In October 1981, 30-year fixed mortgage rates hit their historical peak at 18.63%. That same year brought about the highest average 30-year rate at 16.64%. The culprit? Record inflation caused by the OPEC embargo.

How often should I compare mortgage interest rates?

If you’re in the market to buy a house or refinance your existing mortgage, you might consider checking interest rates daily. Mortgage rates change every day, so understanding rate fluctuations can inform you of the best time to lock a rate in.

Mortgage refinancing is the process of swapping your old loan for a new loan. Homeowners can take advantage of lower rates to decrease their monthly payment. This extra money could go toward the principal, paying other debts or building up your savings.

A cash-out refinance is a refinancing option if you have enough equity in your home. With a cash-out refinance, you can tap into home equity you’ve built through repayment of your home loan as well as home value appreciation. You can use that money to pay off other debts or make home renovations.

Use our refinance calculator to see what your new monthly mortgage payment could be.

Lower mortgage interest rates encourage home buying. Low rates mean less money paid in interest. This translates to a lower payment. Mortgage lenders determine how much you can borrow by comparing your income to your payment. With a lower monthly payment, you may be able to afford more house.

Even if rates slightly rise, an adjustable rate mortgage (ARM) can still offer extremely low mortgage rates. The interest rates on ARMs adjust over a period of time. You may be able to get into a lower-rated ARM now, then change the loan before it adjusts. Talk to your lender about the possibility of converting your ARM to a FRM if rates go lower.

Still curious about historical interest rates? Here are the answers to some of your burning questions:

What were the lowest mortgage rates in history?

The lowest historical mortgage rates in history for 30-year FRMs were more recent than you might think. December 2020 saw mortgage rates hit 2.68%, according to Freddie Mac, due largely to the effects of COVID-19. The same goes for the lowest average, with an annual rate of 3.11% for 2020.

What were the highest mortgage rates in history?

October 1981 saw 30-year FRM mortgage rates hit their historical peak at 18.45%. That same year saw the highest annual average at 16.63%. The culprit? Record inflation caused by the OPEC embargo.

By looking at all the historical mortgage rate data available from Freddie Mac, a trend becomes clear: With the exception of a spike in the 1980s, rates have gotten lower every decade – until now. The average rate in 1971 was 7.54%. In 2020, the average rate was 3.11%, and it may be a while before rates go this low again.

As of the final week in September 2023, the average interest rate on a 30-year fixed-rate mortgage was above 7.3%, with the potential to rise even further this year.

Ready to start your journey to homeownership? Apply online today and lock in your interest rate before rates rise again.