Today's Mortgage Rates Aren't the Highest We've Seen

Steep interest rates have made it more difficult to afford homes.

But are rates that high in a historical sense?

The tide could be starting to turn, though experts anticipate volatility in the mortgage market.

TheFederal Reservehas started to drop its benchmark interest rate, which will influencehow banks and lendersadjust borrowing rates overall.

Here’s a look at mortgage rates historically and how to interpret where we are now.

What is the lowest mortgage rate in history?

Thelowest mortgage ratewe’ve ever seen is in recent memory.

Average rates also fluctuate daily and vary by lender.

This wasn’t an anomaly.

During severe downturns or recessions, the central bank usually lowers interest rates to encourage spending and borrowing.

Otherwise, consumers might be nervous about making significant financial transactions, like buying a house.

The highest mortgage rate recorded for a 30-year fixed loan was 18.63% in 1981.

Compared with today’s mortgage rates, that number is gigantic, Channel said.

At the time, the economy was witnessing something uniquely different from the COVID era.

Since 1971, the median 30-year mortgage rate is 7.4%, according toFreddie Mac.

The massive uptick caused many buyers to get priced out of the housing market.

But it’s not a slow and steady march.

Broadly speaking, mortgage rates change based on how the overall economy is doing, according to Channel.

But of course, it’s more complicated than that.

Policy changes from the Fed don’t have a direct, one-to-one impact on mortgage rates.

But they do play a role.

The Fed sets its federal funds rate to achieve its goal of maximum employment and stable inflation.

Inflation also plays a role.

High inflation often correlates with high interest rates.

And there’s the supply-and-demand factor.

Banks sometimes lower mortgage rates to attract more borrowers when demand is otherwise low.

Not every homebuyer gets quoted the same mortgage rate.

Your personal mortgage rate depends on factors specific to your financial profile.

“The better your score is, the better your rate is going to be,” Krieger said.

Shop around.Different lendersmight quote different rates for the exact same person, Channel said.

That increases your risk profile and can lead to higher rates, Channel said.