Some of us in the mortgage business, like myself, track interest rates every day or even every hour. Others, like most consumers, only hear about rates climbing or falling second-hand, on the news or in the newspaper. Even more homeowners pay close attention to the interest rate environment only when it’s time for them to buy a house or refinance.
Due to our sporadic and momentary attention span when it comes to interest rates, it’s easy to lose sight of the fact just how low rates really are from a historical perspective. So today, we set out to answer the surprisingly elusive question, “What is the historical average mortgage interest rate?”
The number I’ve heard in the past was 7.5%, but that was only based on speculation and never concrete facts. So I took to Google to research some solid facts on mortgage interest rates over time.
Surprisingly, top hits on Google didn’t even offer straightforward numbers. There were plenty of sites with fancy graphs showing mortgage interest rate trends and charts, but none of them could offer one numerical answer.
Out of curiosity, I took to the most opinionated Internet resource on the planet, Facebook, where I polled people the same question. The responses ranged from the 4% range all the way up to 11% as the all-time average mortgage rate, but none were correct.
So why is the average mortgage interest rate over time so hard to ascertain?
The problem is that national mortgage interest rates have only been tracked since 1971 (or 1972). Before that, most people got their mortgages from a savings and loans or large commercial banks. There were also a lot of variable loans, balloon loans, and short-term loans that make it impossible to trace the average interest rate of a 30-year fixed mortgage before the 70s.
Freddie Mac (FHLMC, the Federal Home Loan Mortgage Corporation) was established in 1970 to regulate the business of mortgage interest rates and home buying. So for I used that as my starting point, tallying all numbers from 1972 on, by the time Freddie was in full effect and our current model for recording interest rates alive and well.
So by adding up Freddie Mac’s yearly average mortgage rates since 1971 and averaging, I came up with the historical average 30-year fixed mortgage interest rate as:
8.16%
That’s certainly a long way off from the interest rates we’re used to seeing the last couple years in the 3’s and 4’s.
In fact, the majority of years since 1971, the interest rate has been more than double the average rate of 2016!
Here is more analysis:
• The highest was in 1981 when they were a whopping 16.04%
• The lowest was 2013 when they fell to 3.66%!
• The best 5-year run of rates was from 2009 to present when they averaged 4.36%.
• The worst 5-year run was from 1980-1984 when they averaged an astronomical 14.76%
These averages based on the yearly average, not monthly, so how can we group the pattern of where interest rates have hovered? Since 1971, mortgage interest rates have been:
• Under 4% 4 years (all since 2012)
• Under 5% 8 years (all since 2010)
• Under 6% 12 years (all since 2003)
• In the 7 or 8% range 13 years
• 9% or more 15 years
• 10% or more 11 years
• 12% or more 6 years
• Surprisingly, rates have been over 9% more often than they have been under 6% (15 times to 8 times) and in the 7 or 8% range 13 out of those 42 years.
Here are the average 30-year fixed interest rates per Freddie Mac’s website:
2017 4.15
2016 3.65
2015 3.85
2014 4.17
2013 3.98
2012 3.66
2011 4.45
2010 4.69
2009 5.04
2008 6.03
2007 6.34
2006 6.41
2005 5.87
2004 5.84
2003 5.83
2002 6.54
2001 6.97
2000 8.05
1999 7.44
1998 6.94
1997 7.6
1996 7.81
1995 7.93
1994 8.38
1993 7.31
1992 8.39
1991 9.25
1990 10.13
1989 10.32
1988 10.34
1987 10.21
1986 10.19
1985 12.43
1984 13.88
1983 13.24
1982 16.04
1981 16.63
1980 13.74
1979 11.20
1978 9.64
1977 8.85
1976 8.87
1975 9.05
1974 9.19
1973 8.04
1972 7.38
1971 7.59
What does this all mean for the average consumer? It indicates that if you’re thinking about buying a home now or refinancing, you should do so ASAP before interest rates inevitably crawl back up toward the historical average of 8.16%.
Or, if nothing else, you now have a rare piece of real estate and mortgage trivia to share with your friends…on Facebook!