Posted on January 18th, 2023.

Historical mortgage rates have jumped above 18% and have plummeted below 3% since 1971. To learn more about historical mortgage rates, read this article.

Freddie Mac started keeping records of mortgage rates in the US in 1971. Since then, historical mortgage rates have averaged 8%. The fluctuations from historic highs and historic lows during that time, however, have been dramatic.

For instance, mortgage rates reached a historic high of 18.63% during the week of October 9th, 1981. In January 2021, on the other hand, the average mortgage rate hit an historic low, at just 2.65%.

While the figures themselves are glaring, it is important to put them into context, not only in terms of the broader economy but also how much that meant to borrowers in dollars and cents. It is also important to know that, while these trends can tell us a lot, there are different factors that can impact an individual borrower’s mortgage rate.

Here is everything you need to know about historical interest rates across the US—and how they impact individual borrowers.

What have mortgage rates been historically?

Historical mortgage rates have averaged just under 8% since 1971, according to Freddie Mac. However, mortgage rates can fluctuate dramatically from decade to decade and year to year. Let's look at the historical mortgage rates in each of the past six decades to see how the rate fluctuations have impacted purchasing or refinancing homes in the US.

1970s

30-year fixed-rate mortgages hovered between 7.29-7.73% in 1971, the first year Freddie Mac began surveying mortgage lenders. By 1974, the annual inflation rate had begun spiking—and continued its rise well into the next decade.

Lenders were then forced to increase their rates simply to keep up with the spiking inflation, which led to unpredictable mortgage rates for borrowers. Nearing the end of 1978, mortgage rates reached double-digits at 10.11%. By the end of the 1970s, that rate rose even higher—to 12.90%.

1980s

Inflation increased to 9.5% in 1981. The US Federal Reserve increased the rate of federal funds—which is an overnight benchmark rate that lenders charge each other—to fight inflation. Due to the continuing increases in the federal funds rate, mortgage rates rose to a record high of 18.45% in 1981.

Mortgage rates continued in the double digits for the remainder of the 1980s, despite the Fed’s strategy to return inflation back to normal levels near the end of 1982.

1990s

At the beginning of the 1990s, mortgage rates returned to single digits more consistently. If you bought your property with a mortgage during the 1980s—when rates were in the 18% range—you would have been able to cut your rates in half when the rates dipped.

For instance: By refinancing from an 18% rate to a 9% rate, borrowers with a mortgage of $120,000 could reduce the principal and interest payment on their mortgage to $966 from $1,809. This would have allowed homeowners to refinance numerous times.

2000s

When mortgage rates return to levels above 8% in 2000, the downward rates trend stalled and changed direction. By 2003, mortgage rates eventually dipped below the 6% mark and hovered around the 5% and 6% range for the remainder of the decade. In 2009, however, mortgage rates dropped to 4.81%—a decade low.

2010s

In November 2012, mortgage rates hit a record low of 3.35%. For context, the monthly payment for a home loan of $100,000 at the record high mortgage rate of 18.45% in 1981 was $1,544. In 2012, when rates were 3.35%, the average monthly payment was considerably lower, at $441. For the rest of the decade, mortgage rates hovered around the 3.45% to 4.87% range.

2020s

In the early 2020s, mortgage rates dropped to historical new lows. To stabilize the economy in the face of the COVID-19 pandemic—and its lockdowns—the Federal Reserve cut the federal funds rate to nearly 0%. Just over a year later, that helped contribute to one of the highest increases in inflation since the 1980s.

The 30-year mortgage rate dropped to a new historical low of 2.68% by December of 2020. In 2021, mortgage rates hovered between 2.70% and 3.10%, which gave many borrowers the chance to refinance or purchase properties at the lowest rates on record.

2022

The Consumer Price Index—which gauges consumer inflation—rose by 8.5% in March 2022. That was the biggest 12-month increase since 1981. Beginning the year at 3.45% in January, mortgage rates were already increasing prior to the inflation report. Mortgage rates continued to increase steadily every month in 2022; As of the middle of May of 2022, the U.S. weekly average 30-year fixed rate increased to 5.30%.

What is the lowest interest rate for a mortgage in history?

The lowest interest rate for a mortgage in history came in 2020 and 2021. In response to the COVID-19 pandemic and subsequent lockdowns, the 30-year fixed rate dropped under 3% for the first time since 1971, when Freddie Mac first began surveying mortgage lenders. In January 2021, the new record low interest rate was just 2.65%.

To put that into perspective, the monthly cost for a $200,000 mortgage loan at a rate of 2.65% is $806, not counting insurance or taxes. Compared to the 8% long-term average, you would save $662 per month, or $7,900 per year.

Lowest annual mortgage rate: 2016

While the lowest interest rate for a mortgage in history came in 2020-2021, the lowest annual mortgage rate on record was in 2016, when the typical mortgage was priced at 3.65%. This means that for a mortgage of $200,000, and a rate of 3.65%, the average monthly cost for principal and interest was $915. Compared to the long-term average mortgage rate, that is $553 per month less.

When was the last time mortgage rates were 7%?

Mortgage rates were 7% in October 2022. In fact, the average long-term US mortgage rate—which resulted from the Federal Reserve’s rate hikes to calm the highest inflation in 40 years—hit 7% for the first time in over two decades.

Near the end of October 2022, the 30-year mortgage rate jumped from 6.94% to 7.08%, according to Mortgage buyer Freddie Mac. Prior to that, the last time the average mortgage rate hovered around 7% was in April of 2002. At that point, the US was still being impacted by the September 11 terrorist attacks and still several years away from the 2008 mortgage crisis. For added context, in October 2021 mortgage rates on 30-year mortgages averaged just 3.14%.

What was the highest mortgage rate in the last 30 years?

The highest mortgage rate in the last 30 years was in 1994, when the average 30-year rate was at 8.38%, according to Freddie Mac. In 1992, however, the average 30-year rate was 8.39%. These are slightly above the long-term average mortgage rate of just under 8%, since Freddie Mac started keeping records in 1971.

The highest mortgage rate on record came in 1981. That year, the average mortgage rate was at a whopping 16.63%. To put that into context, at 16.63%, the monthly cost for principal and interest on a $200,000 mortgage would be $2,800. Compared to the long-term average (about 8%), that’s an extra monthly cost of $1,300, which equals $15,900 a year.

But it gets worse. Some homeowners actually paid more money. During the week of October 9, 1981, mortgage rates averaged 18.63%—the highest weekly rate recorded. In fact, that is almost five times higher than the annual mortgage rate in 2019.

Source: Historical mortgage rates in the USA: Highest High and Lowest Lows