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How low can we go? 30-year mortgage rates chart tells the story

Peter Miller
The Mortgage Reports contributor

30-year mortgage rates chart: Where are we now?

If you look at 30-year mortgage rate charts, there’s a trend you can’t miss. Today’s rates are low. Really low.

In fact, mortgage rates in early 2020 are less than half the historic norm.

Chart showing how 30-year mortgage rates have steadily fallen since the 1980's, reaching record lows in 2020

This makes mortgages more affordable and homes more sellable.

In short, it’s a better time to buy a house than it has been in almost 50 years. And mortgage rates are to thank.

Find and lock a low mortgage rate (Jul 12th, 2020)

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Average 30-year mortgage rates since 1972

Year Average 30-Year Rate Year Average 30-Year Rate Year Average 30-Year Rate
1972 7.38% 1988 10.34% 2004 5.84%
1973 8.04% 1989 10.32% 2005 5.87%
1974 9.19% 1990 10.13% 2006 6.41%
1975 9.05% 1991 9.25% 2007 6.34%
1976 8.87% 1992 8.39% 2008 6.03%
1977 8.85% 1993 7.31% 2009 5.04%
1978 9.64% 1994 8.38% 2010 4.69%
1979 11.20% 1995 7.93% 2011 4.45%
1980 13.74% 1996 7.81% 2012 3.66%
1981 16.63% 1997 7.60% 2013 3.98%
1982 16.04% 1998 6.94% 2014 4.17%
1983 13.24% 1999 7.44% 2015 3.85%
1984 13.88% 2000 8.05% 2016 3.65%
1985 12.43% 2001 6.97% 2017 3.99%
1986 10.19% 2002 6.54% 2018 4.54%
1987 10.21% 2003 5.83% 2019 3.94%

Can 30-year mortgage rates go lower?

When it comes to mortgage rates, expect the unexpected.

Rates can move unpredictably — sometimes in borrowers’ favor, and sometimes not.

2020 has been a buyer-friendly year so far. At the time we originally wrote this article (early February), rates were sitting comfortably at 3.5%.

We predicted they wouldn’t go much lower unless there were “unexpected moves” in the market.

And that’s exactly what happened. As COVID-19 continued to spread, interest rates plummeted.

Then, on March 4, 2020, Freddie Mac’s survey recorded a new record low for 30-year fixed rates: just 3.29%.

Freddie Mac Weekly Rates Mortgage Chart for March 4 2020, showing record-low rates

Source: Freddie Mac

So, can rates go lower still?

The short answer is that mortgage rates can always go lower. But you shouldn’t expect them to.

In fact, 30-year rates have already ticked back up, above 3.29%.

Since Freddie Mac’s data is collected early in the week, record lows were already gone by the time the survey published on Thursday, March 5.

That might seem strange, given that stock markets and 10-year treasury yields continued to drop off.

But remember that mortgage rates operate in their own market.

Lenders have control over the rates they set, and many are content to keep rates (and profit margins) a little higher. This helps stem the tide of refinancers and keep their workload manageable.

Also, mortgage rates have to answer to end investors.

When rates fall too rapidly, investors start paying less for mortgage-backed securities (MBS) — the financial instruments that drive mortgage rates. This is because investors assume homeowners will refinance, paying off their loans faster and reducing the returns on interest.

Less money from investors, in turn, means lenders have to keep their rates a little higher, or charge borrowers bigger fees for lower rates.

So don’t expect mortgage rates to keep falling in lock-step with the rest of the market.

They could push lower, but they’re just as likely to stay stagnant. And sooner or later, they’re bound to rise again.

Find and lock a low mortgage rate (Jul 12th, 2020)

Historical perspective: Banner years for mortgage interest rates

The long-term average for mortgage rates is about 8%. That’s according to Freddie Mac records going back to 1971.

But mortgage rates can move a lot from year to year — even from day to day. And some years have seen much bigger moves than others.

Here’s a look at just a few, to show how rates often buck conventional wisdom and move in unexpected ways.

1981 — The all-time high

This year was the worst on record. How bad is bad? The average mortgage rate in 1981 was 16.63%.

At 16.63% a $200,000 mortgage has a monthly cost for principal and interest of $2,800. Compared with the long-time average that’s an extra monthly cost of $1,300 or $15,900 per year.

And that’s just the average – some people paid more. For the week of Oct. 9, 1981 mortgage rates averaged 18.63%, the highest weekly rate on record and almost five times the 2019 annual rate.

2008 — The slump

This was the final gasp of the mortgage meltdown. Real estate financing was available in 2008 for 6.03% according to Freddie Mac. The monthly cost for a $200,000 mortgage was about $1,200 per month, not including taxes and insurance.

2016 — The all-time low

2016 held the lowest annual mortgage rate on record going back to 1971. Freddie Mac says the typical 2016 mortgage was priced at just 3.65%.

A $200,000 mortgage at 3.65% has a monthly cost for principal and interest of $915. That’s $553 a month less than the long-term average.

The only time mortgage rates dropped lower was in 2012, when one week in November averaged 3.31%. But some of 2012 was higher, and the entire year averaged out at 3.66% for a 30-year mortgage.

2019 — The surprise dropoff

In 2018, many economists predicted that 2019 mortgage rates would top 5.5%. That turned out to be wrong.

In fact, rates dropped down in 2019. The average mortgage rate went from 4.54% in 2018 to 3.94% in 2019.

At 3.94% the monthly cost for a $200,000 is $948. That’s a savings of $520 a month – $6,240 a year – when compared with the 8% long-term average.

Are negative mortgage rates in our future?

Around the world, some $15 trillion has been invested at negative interest levels, according to Bloomberg. There are actually mortgages with negative interest. That means the bank pays the borrower.

Could that happen in the U.S.? Lower rates are certainly plausible, but negative rates seem like a stretch.

“From a US perspective,” says the Urban Institute, “negative mortgage rates would require a rate decrease by more than 350 basis points. But we have seen moves of this magnitude recently. For example, mortgage rates decreased by 300 basis points between 2007 and 2012.”

So it could theoretically be possible. But note: that drop of 300 basis points (or 3%) took five years. And, the lower rates go, the harder it is for them to drop further.

So don’t expect negative interest rates — or even rates much lower than they are today — in the very near future.

When to lock your mortgage rate

Keep an eye on daily rate changes. But if you get a good mortgage rate quote today, don’t hesitate to lock it in.

Remember, if you can secure a 30-year mortgage rate in the mid-3% range, you’re paying less than half as much as most American homebuyers in recent history. That’s not a bad deal.

Verify your new rate (Jul 12th, 2020)