Inflated mortgage rates are currently keeping many potential homeowners from entering the market. However, the average rate of 7.0% today is not the highest homeowners have faced. A recent review by Bankrate.com examined mortgage rates and market trends from the 1970s through 2024. The historical data reveal that today’s rates have not come close to the record peak of 18.4% experienced in the early 1980s.

Mortgage Rates: The Historical Trends

In the 1970s, the 30-year fixed-rate mortgage became the most popular home loan option, starting the decade at about 7.3% in 1971, according to experts at Freddie Mac. By the end of 1979, rates had surged to 12.9%, driven by the Federal Reserve’s expansionary policies and rising inflation.

The 1980s saw unprecedented mortgage rate increases. At the beginning of 1980, the median home price in the U.S. was $63,700, rising to $123,900 by 1990. The 30-year fixed mortgage rate peaked at 18.4% in October 1981, a result of the Great Inflation. As the Federal Reserve managed to control inflation, rates gradually decreased, ending the decade at around 9.78%.

During the 1990s, rates saw a dramatic decline. By 1998, the average 30-year fixed-rate dropped to 6.91%.

The 2000s were marked by the mortgage crisis. The average 30-year fixed mortgage rate fell from about 8% at the start of the decade to 5.4% by 2009. The Federal Reserve’s quantitative easing measures, including the bulk purchase of mortgage bonds, helped drive down interest rates and supported economic recovery.

In the 2010s, rates continued their downward trend. Starting in the 4% range, rates dipped below 4% during the decade and ended back in that range, driven in part by the Federal Reserve’s reduced bond-buying activities.

The 2020s began with historically low mortgage rates, with the 30-year fixed rate dropping below 3% in 2020 due to pandemic-related economic uncertainty. Rates began to climb in 2021 but remained tempered by ongoing pandemic concerns. In 2022 and 2023, the Federal Reserve’s efforts to curb inflation led to a significant increase in mortgage rates, with the 30-year rate surpassing 8% by October 2023. As of mid-2024, rates have stabilized in the low 7% range, things most closely mirror the early 1990s.

Impact on Home Buying

Lower mortgage rates generally increase demand among homebuyers and enhance purchasing power. Conversely, higher rates lead to increased monthly payments, which have priced many out of the current housing market.

Experts say while monitoring rates is important, trying to time the market can be risky. The best approach is to pursue homeownership when it aligns with your financial situation and personal readiness. Remember, a home is not just an investment but a place to live and thrive.