How Low Are Mortgages Rates Right Now?
Didier Malagies • July 23, 2020
How Low are Mortgage Rates Right Now?
Jordan Borchard posted in
Housing in Housing News
How Low Are Mortgage Rates Right Now? Just Look at the Sky-High Numbers From the ’80's and 90's
Written by: Brenda Richardson
Traditionally, proposals and parenthood lead to home purchases. With interest rates below 3%, however, mortgage prices may join the list.
Economic uncertainty surrounding the coronavirus pandemic has driven mortgage rates to numerous record-lows since March. During the week ending July 16 average rates hit 2.98%, dropping below 3% for the first time. As a result, purchase applications are up 16% from a year ago and refinance applications are up 107%, according to the Mortgage Bankers Association.
“The record-low level of fixed-rate mortgage rates is good news for all home buyers, and particularly for first-time home buyers, many of whom have been renting in multifamily buildings and want to move to a single-family home during the pandemic,” said Frank Nothaft, chief economist for property analytics provider CoreLogic. “First-time home buyers have responded to the enhanced affordability of lower mortgage payments by stepping up purchases from a year ago.”
For instance, Hunter Stuart and his wife decided to give up the three-bedroom Chicago apartment they’d been renting since 2017 and buy a place in the suburbs in June. A growing family—their second child is due to arrive in September— was only part of what motivated the Stuarts to become homeowners. “We got a pretty good price on the house, and the interest rate being low was definitely a motivating factor,” said Stuart, who took out a 30-year loan with a fixed rate of 3.25%.
Rates this low would have been unimaginable when the parents and grandparents of today’s first-time buyers were entering the housing market. “Depending how much history you’re using as your judge for mortgage rates can make a really big difference in whether you think a certain rate is high or low,” said Danielle Hale, Realtor.com’s chief economist.
Here’s a look back at rates through the decades.
The 1970s
Bottom rate: The average rate on a 30-year fixed mortgage was 7.31% in April 1971, when Freddie Mac started surveying lenders. This was close to the low for the decade.
Peak rate: The 70s ended at high of 12.9%
In the early 1970s, surging energy prices amid an oil crisis fueled a new era in American inflation and the economy plunged into a severe recession. Mortgage rates soared as a result. When Paul Volcker took over the Federal Reserve in 1979, consumer inflation was running at an annual pace of about 9%. He pledged to make fighting inflation his top priority, telling lawmakers the Fed would “have to call the shots as we see them.” Volcker raised the Fed’s benchmark interest rate from 11% to a record 20% by late 1980, contributing to higher mortgage rates. Those high interest rates made it so expensive for people and companies to borrow that the economy weakened steadily. Nevertheless, the decade ended with the homeownership rate at 65.4%, about one percentage point higher than at the start of 1970, according to the U.S. Census Bureau.
The 1980s
Peak rate: 18.45% in October 1981
Bottom rate: 9.04% in March 1987, fluctuating between 9% and 11% for the rest of the decade
In late 1980 and early 1981, the Fed once again tightened the money supply, allowing the federal funds rate to approach 20%. Subsequently, long-run interest rates continued to rise. This resulted in mortgage rates reaching an all time-high of 18.45% by 1981. The economy officially entered another recession in the third quarter of 1981 as high interest rates put pressure on sectors of the economy reliant on borrowing, including manufacturing, construction and home buying. U.S. monetary policy eased in 1982, helping lead to a resumption of economic growth. By October 1982, inflation had fallen to 5% and long-term interest rates began to decline. The homeownership rate dropped from 65.5% in 1980 to 63.8% in 1989.
The 1990s
Peak rate: 10.48% in May 1990
Bottom rate: 6.71% in October 1998
The economy was in recession from July 1990 to March 1991, having suffered the savings and loan crisis in 1989 and a spike in gas prices as the result of the Gulf War. After that, the 1990s were characterized by strong economic growth, steady job creation, low inflation, rising productivity, economic boom and a surging stock market. The commercialization of the internet led to the greatest expansion of capital the country had ever witnessed. Mortgage rates, explains Hale, “stabilized around 10%, and then essentially started this long-term declining trend that we’ve seen from 1990 until now, with ups and downs for things that are going on in the economy such as expectations about future growth and the way the Fed is setting overall interest rates.” After sliding in the 1980s, the rate of homeownership increased to 66.9% in 1999 from 64% in 1990.
The 2000s
Peak rate: 8.52% in May 2000
Bottom rate: 4.81% in April 2009
After years of considerable growth, the housing market fell into a deep decline beginning in 2006. A combination of favorable interest rates and relaxed standards for mortgage loans resulted in peak home prices. Home loans were accessible to borrowers who had low credit scores and a higher risk of defaulting on loans. These so-called subprime borrowers were allowed to take out adjustable-rate mortgages, which would start out with low monthly payments that would become much larger after a few years. When house prices peaked, mortgage refinancing and selling homes became a less viable means of settling mortgage debt. Mortgage loss rates began rising for lenders and investors. By the fall of 2008, borrowers were defaulting on subprime mortgages in high numbers, causing turmoil in the financial markets, the collapse of stock prices and the Great Recession. The homeownership rate declined to 67.2% in 2009 from 67.5% in 2000.
The 2010s
Peak rate: The decade started at a high of 5.03%, rates approached that level in 2018 but stopped climbing at 4.87% that November
Bottom rate: 3.35% in November 2012
As the decade began, the market was battling to regain its footing in the wake of one of the largest housing downturns in U.S. history. Foreclosure filings were at a peak of 2.9 million. In an effort to rebuild trust in the financial system, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 to protect consumers from the unfair and deceptive practices and products that led to the 2008 crisis.
In the vast majority of the country, home value appreciation accounted for most of the growth in the total value of the housing stock. The housing market added $11.3 trillion in value, a little more than a 50% increase in the 2010s. About 14% of that gain was from new housing stock, with the remainder from increased values of the existing stock. The homeownership rate decreased to 65.1% in 2019 from 66.5% in 2010.
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📉 1. Borrowing Becomes Cheaper Mortgage rates tend to fall, making it easier for people to buy homes or refinance. Car loans, personal loans, and credit cards may also have lower interest rates. Businesses can borrow more cheaply to invest in growth. 💸 2. Consumer Spending Increases Since borrowing is cheaper and savings earn less interest, people are more likely to spend money rather than save it. This can boost demand for goods and services, helping to stimulate economic activity. 🏦 3. Savings Yield Less Savings accounts, CDs, and bonds typically offer lower returns. This can push investors to move money into riskier assets like stocks or real estate in search of higher returns. 📈 4. Stock Market Often Rallies Lower rates can mean higher corporate profits (due to cheaper debt) and increased consumer spending. Investors may shift funds from bonds into stocks, driving up equity prices. 💵 5. The U.S. Dollar May Weaken Lower interest rates can make the dollar less attractive to foreign investors, potentially weakening the currency. This can help U.S. exporters (as their goods become cheaper abroad) but may also increase the cost of imports. 🧩 6. Inflation Could Rise More spending and borrowing can increase demand, which may push prices up, leading to higher inflation—especially if supply can’t keep up. 🏚️ 7. Real Estate Activity Tends to Pick Up Lower mortgage rates can boost homebuying, refinancing, and construction, which helps stimulate related industries. tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
Mortgage purchase applications are on a 22-week growth streak primarily due to a combination of improving market conditions, seasonal trends, and changing consumer behavior. Here's a breakdown of the key reasons behind the sustained growth: 🔑 1. Falling Mortgage Rates Mortgage rates have been gradually declining from the highs seen in 2023. Even small drops in interest rates significantly improve affordability, prompting more buyers to apply for loans. Borrowers are locking in rates with the hope that they’ve hit a local low. 🏡 2. Pent-Up Demand from 2023 Many potential buyers delayed purchases during 2023 due to high rates and limited inventory. As conditions improve, backlogged demand is being released into the market. 🌞 3. Spring & Summer Buying Season The U.S. housing market typically sees a seasonal increase in purchase activity starting in spring and continuing through summer. Families prefer to move during school breaks, contributing to more applications in this window. 💼 4. Improved Inventory Levels While still tight, housing inventory has started to improve slightly in some regions. Builders are offering incentives and new constructions are increasing, drawing more buyers into the market. 📈 5. Confidence in the Economy A strong labor market and steady wage growth are boosting consumer confidence , encouraging people to buy homes. Some buyers are moving before potential rate hikes or home price increases . 💡 6. Shift Toward Homeownership Rising rents and lifestyle changes post-pandemic are pushing many toward owning rather than renting . First-time homebuyers are a large portion of this demand. Summary: The 22-week growth streak in mortgage purchase applications is being driven by lower mortgage rates, seasonal buying trends, improved inventory, and returning buyer confidence . While challenges like affordability and supply remain, these positive signals suggest a slow but steady rebound in the housing market .
During the mortgage process, several disclosure documents are provided to help you understand the terms of the loan, your rights, and the costs involved. These disclosures are required by law and are designed to promote transparency and protect you as a borrower. Here’s a breakdown of the key disclosures you'll receive: 1. Loan Estimate (LE) When: Within 3 business days of submitting a loan application. Purpose: Provides a summary of the loan terms, estimated interest rate, monthly payment, closing costs, and other fees. Key sections: Loan terms (rate, type, prepayment penalty, balloon payment) Projected payments (principal, interest, taxes, insurance) Costs at closing (origination charges, services you can/cannot shop for) Why it matters: Lets you compare offers from multiple lenders. 2. Closing Disclosure (CD) When: At least 3 business days before closing. Purpose: Provides final details of the mortgage loan, including actual costs. Key sections: Final loan terms (rate, payments, closing costs) Cash to close (how much you need to bring to closing) A detailed breakdown of costs and payments over time Why it matters: Helps you confirm everything is accurate before you close. 3. Mortgage Servicing Disclosure Statement When: Within 3 business days of application. Purpose: Explains whether your loan might be sold or transferred to another company for servicing. Why it matters: Tells you who will manage your payments and account. 4. Affiliated Business Arrangement (AfBA) Disclosure When: At the time of referral to an affiliated business (e.g., title company). Purpose: Discloses any relationships between the lender and other service providers and explains you’re not required to use them. Why it matters: Ensures you know if there’s a potential conflict of interest. 5. Home Loan Toolkit (for purchase loans) When: Within 3 business days of application. Purpose: A consumer-friendly booklet from the CFPB that explains the mortgage process, costs, and how to shop for a loan. Why it matters: Helps first-time buyers understand the steps and choices. 6. Right to Receive a Copy of Appraisal When: Within 3 business days of application. Purpose: Notifies you that you can get a copy of the appraisal at no additional cost. Why it matters: Gives you insight into the value of the home you’re buying or refinancing. 7. Initial Escrow Disclosure When: At or within 45 days of closing. Purpose: Details amounts to be collected in escrow for taxes and insurance. Why it matters: Shows how your monthly mortgage payment is allocated. 8. Notice of Right to Rescind (for refinances only) When: At closing (for primary residence refinances). Purpose: Gives you 3 business days to cancel the refinance loan. Why it matters: Protects you from making a rushed decision. tune in and learn at https://www.ddamortgage.com/blog Didier Malagies nmls#212566 dda mortgage nmls#324329
