ortgage rates have been rapidly increasing. In 2022, it surpassed the 5% interest rate for the first time in almost a decade. Since the 2008 housing market crash, interest rates have remained lower than 5 %. But, In response to the country's 40-year-high inflation rate, the Federal Reserve has raised interest rates, causing a wide concern among the public.

In comparison to the previous year's historic low mortgage rates, the rate may appear to be high. But, if you compare it to the historical rates, these are not even close. Thus, if you analyze historic mortgage rates, you will observe that current rates are rising but are still historically low.

This article traces the history of mortgage interest rates from the 1930s to the present day to shed light on their past and present dynamics.

The History Of Mortgage Rate

Mortgage Rate Milestones

The 1930s: The Greatest Depression

In the 1930s, the world experienced its worst depression. During the economic slump, many debts went unpaid. Every day, over a thousand homeowners defaulted on their mortgages, and by 1933, half of all mortgages in the United States were in arrears. The economy was pushed into a major depression and as a result, many people lost money, assets, and employment.

The Federal Housing Administration decided to use mortgages to assist the country recover from the Great Depression. As a result, in 1934, the National Housing Act was enacted, making it simpler for citizens to get mortgage loans. Interest rates were hovering around 5% at the time.

The 1940s: World War II and Housing Boom

Following the Great Depression, the world endured World War II. Many people feared that the USA would be pushed into another depression after the war. Rather, the U.S. economy saw steady growth. The Veteran's Administration helped war veterans get low- or no-down-payment mortgages, which fueled an increase in the demand for home loans. This resulted in a housing boom, with homeownership in the United States increasing by 10% between 1940 and 1945. Mortgage rates were less than 4% at the time.

The 1950s and 1960s: Increasing Rates

After the housing boom in the 1940s, people continued to invest in real estate. During this time, it saw the development of American suburbs as people were investing in real estate outside of cities as well. Interest rates continued to increase from 4% to 8%.

The 1970s: Double-Digit Increase

America faced an economic earthquake in the 1970s. The mortgage rates started off the decade at about 7.3 percent in 1971. However, the oil embargo in 1973 drastically limited the oil supply, plunging the United States into a recession with high inflation. Mortgage rates rose into the double digits, peaking at 12.9 percent at the end of 1979.

The 1980s: The Peak

The worst was yet to come in the 1980s. The mortgage rates reached an all-time high of 18.63 % in 1981. It was caused by restrictive monetary policy to combat high inflation and triggered the recession. Fortunately, the economy recovered, and by the end of the 1980s, inflation dwindled, and interest rates had fallen into the 10% range. The rate averaged 9.78% at the end of the decade.

The 1990s: The Cooling-Off

The national recession of 1990 reduced demand for both goods and services. The recession was spurred by the dot-com bubble, an era when investors rushed to buy stocks from overvalued technology companies. When these stocks plummeted, investors turned their focus to fixed-income investments, such as bonds. As bond prices rose and yields fell, mortgage rates, which followed the 10-year Treasury yield, also fell. The mortgage rates plunged to an average of 6.91 percent in 1998.

The 2000s: The Housing Crisis

The subprime mortgage spurred the 2000s housing bubble in the United States. Banks began to provide more cheap mortgages, and consumers began to take out more loans to purchase a home. Mortgage rates fell dramatically in 2009, from 8% to 5.4 percent. Following the housing market crash due to the bankruptcy of many homeowners, the Federal Reserve implemented quantitative easing, purchasing mortgage bonds in bulk to drive down interest rates and pave the way for an economic recovery.

The 2010s: Decade of Low-interest Rate

As a result of the housing crisis of 2008, mortgage rates steadily decreased. The rates started at 4% but continued falling and reached an all-time low in 2016. Home buyers could obtain mortgages at a rate of 3.65%. The decade saw the low mortgage rates, although rates were predicted to go up in the late 2010s.

The 2020s: The Historic Low

Mortgage rates reached an all-time low in the 2020s. The decade began with the covid 19 pandemic, triggering an economic downturn. The Fed was compelled to decrease interest rates to keep money flowing, and the rates reached new lows, with the 30-year fixed-rate falling to just under 3%. In 2020, the yearly average interest rate was 3.11%.

But, it was just a teaser as 2021 saw the lowest mortgage rate in history. The year started with 2.74% and ended with 3.10%. Thus, the yearly average rate stood at 2.96 percent - the lowest all-time record. To offset rising inflation, the Fed raised mortgage rates in 2022. The rates began at 3.45 percent in January and had increased to 5.23 percent as of May.

Mortgage Rate Trends Over Time

30 Year Mortgage Rates

The above graph shows the historical mortgage rates from 1971 to 2022. As you can see, the mortgage rates began rising rapidly in 1979. The mortgage rate rose from 9.64% in 1978 to 16.63% in 1981. The year 1981 had all-time high mortgage rates and is considered the worst year for a mortgage. In 1982, the rate fell slightly to 16.04 percent. Following that, it began to plummet to 10.19 % in 1986.

From 1986 until 1990, the mortgage rate remained stable, averaging 10%. Then it began to drop sharply, reaching 6.94 percent in 1998. The rates remained steady, averaging 5% until 2005 and rising to 6% in 2006. Rates hit the lowest with 3.66% in 2012 and 3.98% in 2013. It continued to decline during the 2000s with an average of 3- 4%. The mortgage rate hit the lowest in 2021 at 2.96%. Mortgage rates started to increase rapidly in 2022, with an average rate of 4.32% as of May.

Why Mortgage Rates Hit The Lowest In 2021?

The pandemic and economic recession pushed the Federal Reserve to decrease interest rates to keep money flowing. Investors seek to diversify their risk during economic instability by investing in mortgage-backed securities. These securities are similar to bonds, but they are created from a pool of bank-purchased house loans. It also has a higher yield than Treasury bonds and is a safer investment. Mortgage back securities prices determine mortgage rates, and as more investors flocked to buy them, mortgage rates fell dramatically.

What Is Causing Mortgage Rates To Rise Rapidly?

After hitting decades of low mortgage rates in 2021, the rates have begun rising. Due to the low-interest rates, the housing market saw high demand but low supply. This prompted housing prices to skyrocket, causing the housing boom. The boom posed a potential threat to the housing market crash, and people started comparing it to the housing market crisis in 2008. Thus, the Federal Reserve increased the interest rate to combat the rising inflation.

Rapid inflation

Additionally, the global economy is in disarray. The ongoing Ukraine-Russia war and China's zero-covid policy have significantly influenced the U.S. economy. These events add more pressure to the current inflationary environment as the supply chain is disrupted, but demand remains persistent. This is not only about inflation in the housing market; it's the overall economy of the U.S. Thus, the fed will increase the interest rates to reduce the money supply in the market and reduce the demand.

How High Will Mortgage Rates Go In 2022?

Mortgage rates hit their lowest point in 2021, with an annual average of 2.96 %. However, the rates started climbing in 2022 after the Federal Reserve announced that it would increase the mortgage rates to curb the 40 years high inflation rate. 2022 began at 3.45% and increased to 5.23% in May.

The mortgage rates in 2022 are summarized in the table as follows:

2022 Mortgage Rate Expectations

Source: Freddiemac.com

As of May, the annual average mortgage rate is 4.32%, 1.36 % more than the yearly average in 2021. Experts have forecasted that the 30-year fixed mortgage may hit up to 7 %, whereas the 15-year mortgage rate may hit up to 6 %.

Should You Lock Your Mortgage Rates?

The mortgage rate will likely increase further. Thus, it is preferable to lock in your mortgage rate as soon as possible. In most cases, lenders allow you to lock the rate for 30 to 60 days without charging any fee. Even if they charge a fee, you can pay extra to lock in your rate for longer. Some lenders even can lock the rate for one year. But, it's essential to know that the additional rate lock can cost up to 0.5% of the mortgage balance.


The mortgage rates hit a historic low due to the pandemic and the economic downturn. The low-interest rate was critical in driving up house demand and inflation, which was high in 40 years.

As a result, the Federal Reserve raised interest rates in 2022. The interest rate had been low since the 2008 housing crisis, and for the first time in a decade, it jumped by more than 5%. Because we've grown accustomed to low mortgage rates, the new rates may appear high, but anyone who knows their history realizes they're still historically low.


Jun 3, 2022

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