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Since 1971, historical mortgage rates for 30-year fixed-rate loans have hit historic highs and lows due to various factors. We’ll use data from Freddie Mac’s Primary Mortgage Market Survey (PMMS) to do a deep dive into what’s driven historical mortgage rate movements over time, and how rate fluctuations affect buying or refinancing a home.
Historical mortgage rates: 1971 to 2022
1971 was the first year Freddie Mac started surveying mortgage lenders, and 30-year fixed-rate mortgages hovered between 7.29% and 7.73%. The annual rate of inflation started spiking in 1974 and continued to spike into the 1980s. As a result, lenders increased rates to keep up with unchecked inflation, leading to mortgage rate volatility for borrowers. Rates crossed into double-digit territory bumping up to 10.11% toward the end of 1978 and steadily rising to 12.90% by end of the 1970s.
By 1981, inflation had risen to 9.5%. The Federal Reserve combated inflation by increasing the federal funds rate, an overnight benchmark rate that banks charge each other. Continued hikes in the fed funds rate pushed mortgage rates to an all-time high of 18.45% in 1981. Although the Fed’s strategy helped push inflation back to normal levels by the end of 1982, mortgage rates remained mostly in the double-digits for the rest of the decade.
Mortgage rates finally crossed convincingly into the single-digits again by the beginning of the 1990s. Homeowners who had purchased their home with a mortgage during the 1980s with rates in the 18% range were able to cut their rates in half as rates dropped. For example, a borrower with a $120,000 mortgage could reduce the principal and interest payment on their mortgage from $1,809 to $966 per month by refinancing from an 18% rate to a 9% rate. The low-rate environment created a refinancing boom, with rates briefly dropping below 7% for most of 1998 — allowing many owners to refinance multiple times.
The downward trend in mortgage rates stalled out and reversed course with rates jumping back above 8% in 2000. However, they gradually made their way back below the 6% mark by 2003 and remained in the high 5% to low 6% range for the rest of the decade, before briefly dropping to a decade low of 4.81% in 2009.
Mortgage rates dropped to a record low of 3.35% in November 2012. To put it into perspective, the monthly payment for a $100,000 loan at the historical peak rate of 18.45% in 1981 was $1,544, compared to $441 at a much lower rate of 3.35% in 2012. For the remainder of the decade, rates stayed in the 3.45% to 4.87% range.
The first two years of the 2020s were a roller coaster ride, with rates dropping to new historical lows; this was followed by one of the highest spikes in inflation since the 1980s just over a year later. After the COVID-19 pandemic hit the United States in 2020, the Federal Reserve cut the federal funds rate almost to 0% to stabilize the economy, as businesses closed to stop the spread of the virus and public health officials ordered Americans across the country to shelter in place.
By December 2020, the 30-year mortgage rate plummeted to a new historical low of 2.68%. Rates spent most of 2021 between 2.70% and 3.10%, giving many borrowers an opportunity to refinance or buy homes at the lowest rates ever recorded.
In March 2022, the Consumer Price Index, an important gauge of consumer inflation, increased by 8.5% — the largest 12-month spike since 1981. Rates were already headed higher before the inflation report, starting the year off at 3.45% in January. They’ve steadily risen each month in 2022, with the U.S. weekly average 30-year fixed rate rising to 5.30% as of May 12, 2022.
Comparing 30-year vs. 15-year fixed rates
Looking at mortgage interest rate trends over time, 30-year fixed mortgage rates have always trended slightly higher than 15-year rates. That’s because the lender takes on an extra risk that you might default over a longer period of time. Comparing a 30-year mortgage rates chart and a 15-year mortgage rates chart, you’ll see that regardless of the direction of rates, 30-year rates are always more expensive than 15-year rates.
Thirty-year fixed-rate mortgages are popular with homebuyers because they provide the stability of a fixed, low monthly payment. The drawback is the higher rate and longer loan term result in higher lifetime interest charges.
Fifteen-year fixed mortgage rates are typically lower, which means you pay less interest over the life of the loan. However, the shorter repayment schedule increases your principal and interest payments — which could put a squeeze on your budget if your income or expenses suddenly change.
Still, lenders may offer more than just 30- and 15-year terms — you could find 10- to 40-year terms with some lenders.
Update example to average loan amounts and rates as of May 5, 2022
2022, with the U.S. weekly average 30-year fixed rate rising to 5.30% as of May 12, 2022.
Fixed-rate loans vs. adjustable-rate mortgages
As 30-year rates increase, lenders may offer more competitive rates on adjustable-rate mortgages (ARMs). Average rates for five-year ARMs have historically offered lower initial rates than 30-year fixed-rate mortgages. However, the difference increases when 30-year rates begin to rise significantly.
For example, if you compare 30-year fixed rates to 5/1 adjustable mortgage rates from May 7, 2020, to May 5, 2022, the difference between the rates on the two loan types increases as 30-year fixed rates increase.
30-year fixed rate
5/1 ARM rate
30-year fixed payment
5/1 ARM payment
Monthly Savings ARM vs. fixed rate
Monthly savings for 5 years
How historical mortgage rates affect buying
When mortgage rates are lower, buying a home is more affordable. A lower payment may also help you qualify for a more expensive home. The Consumer Financial Protection Bureau (CFPB) recommends keeping your total debt, including your mortgage, at or below 43% of what you earn before taxes (known as your debt-to-income ratio, or DTI).
When rates are higher, an ARM may give you temporary payment relief if you plan to sell or refinance before the rate adjusts. Ask your lender about convertible ARM options that allow you to convert your loan to a fixed-rate mortgage without having to refinance before the fixed-rate period expires.
How historical mortgage rates affect refinancing
A refinance replaces your current loan with a new loan, typically at a lower rate. When rates go up, there’s less financial benefit to refinancing. You'll need to ensure you'll stay in your home long enough to recoup closing costs. To do this, divide the total loan costs by your monthly savings. The result tells you how many months it takes to recoup refinance costs, called the break-even point. The quicker you reach your break even, typically, the more cost-effective the refinance becomes.
When mortgage interest rates slide, refinancing becomes more attractive to homeowners. The extra monthly savings could give you wiggle room in your budget to pay down other debt or boost your savings. If the equity in your home has grown, you can tap it with a cash-out refinance. With this type of refinance, you’ll take on a loan for more than you owe. You can use the extra funds as cash to make home improvements or consolidate debt. Lower rates may help minimize the larger monthly payment.