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Mortgage Interest Rates Compared to History: It’s Not as Bad as You Think

Why Interest Rates Shouldn’t Scare You

A home is likely one of the biggest purchases you’ll make in your lifetime — and unless you’re planning to pay for it in all cash, you’ll need to secure a mortgage before beginning your search. A mortgage is a loan provided by a bank or lender that is paid monthly and helps you finance the purchase of a home. A typical mortgage loan has two parts: principal and interest. Your principle is the amount of money you borrow, while the interest is the cost of borrowing that money. 
Throughout the years, home buyers and sellers have seen the ebb and flow of national mortgage interest rates. For example, just a couple of years ago, we saw mortgage rates that were historically low in response to the COVID-19 pandemic. Now, prices are on the rise again.
So, if your New Year resolves to purchase or refinance a residence, read on to better prepare yourself for the market!

A Look at Interest Rates Overtime

You know what they say — hindsight is always 20/20. Past data often serves as a valuable guide to the future. With that in mind, let’s take a look at historic mortgage rates and shed some light on what might happen in the future. 
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Past Rates

Thanks to Freddie Mac, there’s an abundance of useful data available for 30-year fixed-rate mortgage rates beginning in 1971. Looking back, rates in 1971 were in the mid-seven percent range, then moved up steadily until they were at 9.19 percent in 1974. They briefly dipped into the mid-to-high eight percent range before climbing to 11.20 percent in the late 70s.
Interest rates reached their highest point in modern history in 1981 when the annual average was nearly 17 percent. However, by the end of the 80s, interest rates fell back to about ten percent. 
During the 90s and early 2000s, inflation began to calm, and interest rates dipped below seven percent in 1998. Continuing the steady decline, by 2003, rates were in the high five percent range. However, the market crash of 2008 loomed in the near distance, and by 2009, mortgage rates fell almost an entire percentage point — averaging five percent.
Moving into the 2010s, we continued to ride ​​the wave of low bank borrowing costs — entering the new decade at around 4.69 percent. However, rates continued to fall steadily to the mid-three percent range by 2012 and ended up at 3.85 percent by the end of 2015.
After 2016, rates began to rise, and by the end of 2019, rates for a 30-year fixed mortgage sat between 3.95 and 5.34 percent. And when January 2020 came around, the average rate was about 3.7 percent.

Present Rates

The first two years of the 2020s were a roller coaster ride, with rates dropping to new historical lows. However, this was followed by one of the highest spikes in inflation since the 1980s, just over a year later. 
Since July 2022, the Federal Reserve has been raising rates to stabilize the economy. As a result, rates have steadily increased each month in 2022 and are currently sitting at 6.60 percent in January 2023 — making now the best time to buy before rates increase!
Learn More: The Importance of Understanding How to Use a Mortgage Calculator

Why You Shouldn’t Fear Entering the Market

As we can see from the information above, historical rates were far worse than we see today. So, if you’re on the fence about entering the market, you should do so before we see another rate increase to ensure the most bang for your buck. 
All that said, you should feel confident entering the housing market if you have an experienced real estate agent on your side. After all, real estate agents are there to guide you through your buying journey — making it as stress-free as possible. This is especially true if you work with a Redbud Group REALTORS®, as our agents are equipped with all the tools to make your buying process enjoyable! Contact us today to speak with an agent! 
Related6 Benefits Of Having A REALTOR® When Buying

Buy or Sell Your Next Home with The Redbud Group

Now that you know all about current and mortgage rates throughout history, it’s time to take the next step toward buying your new home. The world of real estate can be tricky at times — but luckily, you don’t have to do it alone!
Our experienced Redbud Group REALTORS® are equipped with the local market knowledge and expertise required to make your real estate journey as smooth and easy as possible. To learn more about how we can help you buy or sell your next home, click the button below to get in touch with one of our real estate agent today!
Call us today to learn more.

Work With Us

At Redbud Group, we understand that the home buying & selling process can be stressful. You want to make sure you are making the right move and getting the best price for your home. As always, we are here to help you take those first steps to buying or selling a home! Check out our home buying & selling tips and resources for in-depth information about the home buying & selling process.

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