When you consider the past three years alone, mortgage interest rates have risen dramatically. This is largely because the Federal Reserve pushed mortgage rates below 3% in order to offset the impact of the COVID-19 pandemic in 2020 and 2021. Now that the American economy is entering recovery mode – and the Fed has tightened its policies – mortgage rates have risen by over 50%.

Appreciating today’s low mortgage rates becomes easier when you review past decades. It quickly becomes apparent that aspiring homeowners have it much better now than they did during most points throughout the past 50 years.

1971 – 1980

Average 30-Year Rate: 9.42%

Freddie Mac’s data begin in 1971. They show that the ’70s started out strong with a ~7.5% 30-year mortgage interest rate, but record inflation would produce double-digit mortgage rates by the end of that decade. Unfortunately, the effects of high inflation would only make life harder during the coming decade.


Average 30-Year Rate: 12.34%

The Great Inflation was exacerbated by the 1973-1974 oil embargo imposed by OPEC against nations that supported Israel during the Yom Kippur War. The Fed raised interest rates to counteract the resultant hyperinflation which continued into the ’80s, although this had the unfortunate effect of increasing the cost of borrowing money as well. Interest rates exceeded 18% during 1981 – the highest they have ever reached in American history.


Average 30-Year Rate: 7.91%

The ’90s ushered in the first consistent era of single-digit interest rates since 1978. This was attributable to falling interest rates, as well as to something you are using right now: the internet. The Economic Policy Institute credits the world wide web for giving Americans access to the information they needed to make wiser investment choices and spark a significant economic upturn during the ’90s.


Average 30-Year Rate: 5.96%

Mortgage rates would only decrease following the turn of the century. This trend continued in spite of the subprime mortgage crisis, which the Fed sought to offset by cutting interest rates and effectively lowering the cost of borrowing money. Banks and other financial institutions were able to borrow money at virtually 0% interest, which resulted in ~5% interest rates by the end of the decade.


Average 30-Year Rate: 3.93%

The most recent decade kicked off with interest rates below 5%. Rates would decrease to below 4% by the middle of the decade, a trend attributable to investors flocking to U.S. bonds in response to an otherwise turbulent global market. Mortgage rates began rising after the 2016 election, a trend that remained mostly organically market-driven until the upset caused by the pandemic.

Mortgage rates have risen now that the Fed is no longer taking an active role in lowering them. Make no mistake: You could have gotten a better mortgage rate a couple of years ago than you would today. And as the Fed begins its plans to combat inflation, we can only expect mortgage rates to steadily increase over the coming years.

Only time will tell what kinds of interest rates will become available to homebuyers in the near future, but it is reasonable to anticipate that they won’t remain this low for much longer. If you are considering applying for a mortgage, the best time to act appears to be right now!

If you live in or are moving to Central Minnesota, then the Sherburne State Bank team is standing by to help you own your own home. We offer home equity lines of credit and home equity loans, a variety of mortgages, and both construction and land loans. We welcome you to come visit one of our branches in Becker, Monticello or Princeton in person, or contact us today!

Source: Freddie Mac 

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