Historical Mortgage Rates: Averages and Trends

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After nearly two years of record-low mortgage rates, 2022 started off with rates nearly rising to levels we haven’t seen since before the pandemic.

That doesn’t mean you need to cancel your plans to refinance your mortgage or purchasing home. 

There’s a lot more that goes into the decision than just your interest rate, but rising rates will factor into your decision. Keep in mind, 30-year fixed rates are still close to 4%, much lower than the 5% to 6% average rates we saw just 15 years ago.

A recovering U.S. economy and supply chain issues helped drive inflation to levels we haven’t seen in decades. To keep inflation in check, the Federal Reserve has announced its intentions to raise short-term interest rates and began unwinding its support of the bond market, which helped keep rates low. The main drivers for mortgage rates in 2022 will be, “growth, plus inflation, plus the Fed, really in a nutshell that’s what’s going to be driving rates,” Joel Kan, an economist with the Mortgage Bankers Association, told NextAdvisor.

Many experts have forecast mortgage rates to rise in 2022, and rates have already exceeded the levels some predicted they wouldn’t touch until the end of the year. Let’s take a look at the past few years of historical mortgage rate trends and break down what that means for you.

Historical Mortgage Rate Averages Since 2019

About These Rates

These rate averages are based on weekday mortgage rate information provided by national lenders to Bankrate.com, which is owned by the same parent company as NextAdvisor. These marketplace average rates for a variety of refinance loan types are updated daily, though it is possible rates have changed since this was last updated.

Expert Take on Current Mortgage Rates

As a variety of economic factors affect the market, mortgage rates are expected to move up and down. Factors like inflation, which at 7.9% in February was the highest in 40 years, and anticipation that the Federal Reserve will raise its benchmark short-term interest rate to combat that inflation are pushing them upwards. Causing bigger swings is the Russian invasion of Ukraine, bringing new uncertainty to financial markets. 

Generally, experts expect rates will rise throughout 2022 with plenty of ups and downs along the way. More certainty is expected once the Fed begins raising rates, which is predicted to start this month. “Once we see [the Fed’s] first move, you might see much less volatility,” says Jennifer Beeston, senior vice president of mortgage lending at Guaranteed Rate. “If the Ukraine war wasn’t going on, I would be estimating that next week would even things out. But with the Ukraine war I think we’re going to keep on seeing these swings.”

History of the 30-Year Fixed Mortgage Rate

This chart, which uses data from a survey by Freddie Mac that differs slightly but generally tracks with the Bankrate survey used by NextAdvisor, offers a glimpse at how today’s rates compare with the past two decades. According to the chart, mortgage rates are up from the historically low years of 2020 and 2021, but they still aren’t high if you zoom out more than a few years.

Current mortgage interest rates are still very good from a long-term view, even if they’re breaking through the psychological barrier of 4%. Rates were well above 4% as recently as 2018 and 2019. Before the 2008 crash, a “good” rate was still above 5%. 

What Today’s Mortgage Rates Means for You

Although volatile, rates are trending up. That means the rate you might be quoted one day could be significantly different than one you get the next day. Experts caution against trying to time the market to get the best rate. It’s more important for homebuyers to focus on your home buying budget and stick with a payment you can afford, rather than waiting in hopes of rates dropping next week. “If you think you’re going to like the rate, lock it,” Beeston says. “Because it’s probably going to change in 20 minutes.”

While rates are trending up, don’t expect that to mean home prices will come down. Home prices are expected to keep rising because of a massive demand from buyers and a limited supply of new and existing homes.  If you’re waiting around for the market to crash, you could end up buying in the future when both rates and prices are much higher. “Unless we suddenly have a huge supply of housing, prices are going to keep going up,” Beeston says.

There is a lot to consider when deciding whether or not it’s the right time for you to purchase a home, and your mortgage rate is only one small part. Before you start house shopping, figure out your homebuying budget. Getting preapproved for a mortgage will give you a good idea of how much you can borrow. You’ll also want to save for a down payment, closing costs, and the unexpected expenses that come with owning a home.

But both mortgage rates and home prices are predicted to continue rising. If now is the right time in your life to become a homeowner and you feel you’re well prepared, then the longer you wait, the more expense your home purchase could become. Keep in mind, real estate is local. The housing market where you want to buy a home may not precisely follow the nationwide trends. Working with local real estate professionals is just as important as shopping around for the best mortgage lender.

Frequently Asked Questions (FAQ):

Are Mortgage Interest Rates Going to Rise?

We are likely to see volatile mortgage rate trends from month to month. However, the general consensus for 2022 is that rates will rise. So far, that is exactly what they’ve done.

When assessing today’s mortgage rates, it’s important to look at them from a historical perspective. Although rates are now near their prepandemic levels, they remain historically favorable compared to the 5% to 6% average rates we saw just 15 years ago.

“I would be shocked if I ever saw 6% mortgage rates in my life,” says Logan Mohtashami, housing data analyst with HousingWire. “Rates have been going down for four decades.” He believes that unless the government takes extreme measures to stimulate the economy, demographic trends and other macroeconomic factors will keep rates relatively low in the long term.

What Are Mortgage Interest Rates Based On?

No government entity sets or directly regulates mortgage rates. Rather, they’re based on a number of broader market factors. Everything from the demand for housing, inflation, and the overall health of the economy can influence mortgage rates — as well as refinance rates.

Typically, when the economy is strong and unemployment rates are low, rates will rise because demand is higher. But during an economic downturn rates tend to dip. This is why the economic impact of COVID variants is important to pay attention to when it comes to understanding mortgage rate trends.

Monetary policies set by the Federal Reserve can also have a significant impact on mortgage rates, even though they don’t directly set rates. When the Federal Reserve lowers the federal funds rate or purchases large quantities of treasury bonds, it puts downward pressure on mortgage rates.

How Does a Mortgage Rates Affect My Monthly Payment?

Your monthly mortgage payment typically comprises mortgage, interest, and escrow payments. And what on the surface may look like a small increase in your interest rate, can have a big impact on your bottom line. So it’s important to compare mortgage lenders to ensure you’re getting the best deal.

Example on a 30-year loan:

A 0.5% rate increase on a $250,000 loan balance could cost $71 more a month and over $25,000 extra in interest over the life of the loan.

Loan Term: 30 years

Loan Balance: $250,000

Interest Rate: 4%

Monthly Payment: $1,193

Total Cost: $429,853

Same Loan as above, except with a 3.5% interest rate:

Monthly Payment: $1,122

Total Cost:  $404,308

Difference Per Month: $71

Difference over loan life: $25,545

How Does Credit Score Affect My Rate?

Aside from macroeconomic factors that are out of your control, your personal situation will also influence the interest rate you’re eligible for. Your down payment and credit score can have a big impact on your mortgage rate.

Lenders set mortgage rates based on how risky they determine a loan to be. So having a lower credit score, or smaller down payment will increase the rate you’re likelyto qualify for. On the other hand, improving your credit score and having a bigger down payment can have the opposite effect and reduce your interest rate. While each lender has different standards, having a down payment of at least 20% and a credit score of 700 to 740 will typically get you the lowest mortgage rate.

If you’re having trouble qualifying for a mortgage or getting a decent interest rate, you may have better luck with a government-secured loan. Certain mortgages are backed by the different departments of the federal government and are considered less risky by lenders. There are loans guaranteed by the Federal Housing Administration (FHA loan), Department of Veterans Affairs (VA loan), and the Department of Agriculture (USDA loan).

What Is an APR?

The annual percentage rate, or APR, shows you more than just the interest rate on your loan. It also includes many of the fees you pay on any mortgage or refinance. While your mortgage interest rate is the biggest long-term cost associated with a home loan, it’s not the only expense to pay attention to. Anytime you take out a mortgage, there are upfront fees known as closing costs. This can include fees paid to the appraiser and home inspector, as well as loan origination fees, and discount points. All of these costs add up, and can easily be anywhere from 3% to 6% of the loan amount.

These initial costs can vary significantly by lender. So if you’re comparing loan offers based only on the interest rate, you could end up paying more fees than necessary. This is why understanding APR is important. If one loan has higher loan fees, that will be reflected in the APR, but not the interest rate. So the APR gives you a better idea of the total cost of the mortgage.

Rates as of February 4, 2022