Historical mortgage rates in the USA: Highest High and Lowest Lows

Freddie Mac started keeping records of mortgage rates in the US in 1971. Since then, historical mortgage rates have averaged 8%. The fluctuations from historic highs and historic lows during that time, however, has been dramatic.

For instance, mortgage rates reached a historic high of 18.63% during the week of October 9th, 1981. In January 2021, on the other hand, the average mortgage rate hit an historic low, at just 2.65%.

While the figures themselves are glaring, it is important to put them into context, not only in terms of the broader economy but also how much that meant to borrowers in dollars and cents. It is also important to know that, while these trends can tell us a lot, there are different factors that can impact an individual borrower’s mortgage rate.

Here is everything you need to know about historical interest rates across the US—and how they impact individual borrowers.

What have mortgage rates been historically?

Historical mortgage rates have averaged just under 8% since 1971, according to Freddie Mac. However, mortgage rates can fluctuate dramatically from decade to decade and year to year. Let's look at the historical mortgage rates in each of the past six decades to see how the rate fluctuations have impacted purchasing or refinancing homes in the US.

1970s

30-year fixed-rate mortgages hovered between 7.29-7.73% in 1971, the first year Freddie Mac began surveying mortgage lenders. By 1974, the annual inflation rate had begun spiking—and continued its rise well into the next decade.

Lenders were then forced to increase their rates simply to keep up with the spiking inflation, which led to unpredictable mortgage rates for borrowers. Nearing the end of 1978, mortgage rates reached double-digits at 10.11%. By the end of the 1970s, that rate rose even higher—to 12.90%.

1980s

Inflation increased to 9.5% in 1981. The US Federal Reserve increased the rate of federal funds—which is an overnight benchmark rate that lenders charge each other—to fight inflation. Due to the continuing increases in the federal funds rate, mortgage rates rose to a record high of 18.45% in 1981.

Mortgage rates continued in the double digits for the remainder of the 1980s, despite the Fed’s strategy to return inflation back to normal levels near the end of 1982.

1990s

At the beginning of the 1990s, mortgage rates returned to single digits more consistently. If you bought your property with a mortgage during the 1980s—when rates were in the 18% range—you would have been able to cut your rates in half when the rates dipped.

For instance: By refinancing from an 18% rate to a 9% rate, borrowers with a mortgage of $120,000 could reduce the principal and interest payment on their mortgage to $966 from $1,809. This would have allowed homeowners to refinance numerous times.

2000s

When mortgage rates return to levels above 8% in 2000, the downward rates trend stalled and changed direction. By 2003, mortgage rates eventually dipped below the 6% mark and hovered around the 5% and 6% range for the remainder of the decade. In 2009, however, mortgage rates dropped to 4.81%—a decade low.

2010s

In November 2012, mortgage rates hit a record low of 3.35%. For context, the monthly payment for a home loan of $100,000 at the record high mortgage rate of 18.45% in 1981 was $1,544. In 2012, when rates were 3.35%, the average monthly payment was considerably lower, at $441. For the rest of the decade, mortgage rates hovered around the 3.45% to 4.87% range.

2020s

In the early 2020s, mortgage rates dropped to historical new lows. To stabilize the economy in the face of the COVID-19 pandemic—and its lockdowns—the Federal Reserve cut the federal funds rate to nearly 0%. Just over a year later, that helped contribute to one of the highest increases in inflation since the 1980s.

The 30-year mortgage rate dropped to a new historical low of 2.68% by December of 2020. In 2021, mortgage rates hovered between 2.70% and 3.10%, which gave many borrowers the chance to refinance or purchase properties at the lowest rates on record.

2022

The Consumer Price Index—which gauges consumer inflation—rose by 8.5% in March 2022. That was the biggest 12-month increase since 1981. Beginning the year at 3.45% in January, mortgage rates were already increasing prior to the inflation report. Mortgage rates continued to increase steadily every month in 2022; As of the middle of May of 2022, the U.S. weekly average 30-year fixed rate increased to 5.30%.

Read more: Average mortgage rate: Everything you need to know

What is the lowest interest rate for a mortgage in history?

The lowest interest rate for a mortgage in history came in 2020 and 2021. In response to the COVID-19 pandemic and subsequent lockdowns, the 30-year fixed rate dropped under 3% for the first time since 1971, when Freddie Mac first began surveying mortgage lenders. In January 2021, the new record low interest rate was just 2.65%.

To put that into perspective, the monthly cost for a $200,000 mortgage loan at a rate of 2.65% is $806, not counting insurance or taxes. Compared to the 8% long-term average, you would save $662 per month, or $7,900 per year.

Lowest annual mortgage rate: 2016

While the lowest interest rate for a mortgage in history came in 2020-2021, the lowest annual mortgage rate on record was in 2016, when the typical mortgage was priced at 3.65%. This means that for a mortgage of $200,000, and a rate of 3.65%, the average monthly cost for principal and interest was $915. Compared to the long-term average mortgage rate, that is $553 per month less.

When was the last time mortgage rates were 7%?

Mortgage rates were 7% in October 2022. In fact, the average long-term US mortgage rate—which resulted from the Federal Reserve’s rate hikes to calm the highest inflation in 40 years—hit 7% for the first time in over two decades.

Near the end of October 2022, the 30-year mortgage rate jumped from 6.94% to 7.08%, according to Mortgage buyer Freddie Mac. Prior to that, the last time the average mortgage rate hovered around 7% was in April of 2002. At that point, the US was still being impacted by the September 11 terrorist attacks and still several years away from the 2008 mortgage crisis. For added context, in October 2021 mortgage rates on 30-year mortgages averaged just 3.14%.

What was the highest mortgage rate in the last 30 years?

The highest mortgage rate in the last 30 years was in 1994, when the average 30-year rate was at 8.38%, according to Freddie Mac. In 1992, however, the average 30-year rate was 8.39%. These are slightly above the long-term average mortgage rate of just under 8%, since Freddie Mac started keeping records in 1971.

The highest mortgage rate on record came in 1981. That year, the average mortgage rate was at a whopping 16.63%. To put that into context, at 16.63%, the monthly cost for principal and interest on a $200,000 mortgage would be $2,800. Compared to the long-term average (about 8%), that’s an extra monthly cost of $1,300, which equals $15,900 a year.

But it gets worse. Some homeowners actually paid more money. During the week of October 9, 1981, mortgage rates averaged 18.63%—the highest weekly rate recorded. In fact, that is almost five times higher than the annual mortgage rate in 2019.

What factors affect your mortgage interest rate?

There are various factors that can affect your mortgage interest rate. While tracking mortgage rates can help to reveal certain trends, not every homebuyer will benefit equally from historical mortgage rates, high or low.

The reason is that mortgage loans are personalized, depending on the borrower. Let's take a quick look at some of the factors that affect your mortgage or refinance rate:

1. Credit score
2. Down payment
3. Loan type
4. Loan term
5. Loan amount
6. Discount points

Here is a closer look at each:

1. Credit score

If you have a credit score over 720, you will have many more options for low-interest-rate loans. If, on the other hand, your credit score is under 600, you may qualify for loan programs like USDA, FHA, and VA loans.

Before borrowing, it may be a good idea to give yourself a few months to a year to improve your credit score, if possible. Doing so may help you to save thousands of dollars throughout the life of the loan.

2. Down payment

If you make a higher down payment, you will likely be able to save money on your borrowing rate. Most mortgages require a down payment of 3% or 3.5%, including FHA loans. VA and USDA loans are available with a 0% down payment. However, you can make a 10%, 15%, or 20% down payment, you may qualify for a conventional loan with little or no private mortgage insurance (PMI). It could also significantly reduce your housing costs.

3. Loan type

Your loan type will also impact your interest rate, but the loan type you get is dependent on your credit score. In other words, these factors are interconnected.

For instance, if you have a credit score of 580, you might qualify for a government-backed loan like an FHA mortgage, which offer low interest rates but come with mortgage insurance, regardless of how much you put down. If your credit score is above 620, you may qualify for a conventional loan and possibly a lower rate, depending on factors such as your down payment.

Typically, an adjustable-rate mortgage will offer lower introductory interest rates versus a 30-year fixed rate mortgage, but those rates can change after the initial fixed-rate period. After five, seven, or 10 years, an initially low adjustable-rate mortgage can increase substantially.

4. Loan term

Loan terms typically break down into 30-year fixed-rate mortgages or 15-year fixed-rate mortgages. With a 15-year mortgage, you would have a higher monthly payment because your loan term would be shorter. This means, however, that you would save on interest charges throughout the life of the loan.

Here is an example:

If you have a $300,000 mortgage with a 30-year fixed rate of 5.5%, you would pay roughly $313,000 in total interest during the loan term. If you got a home loan of the same size but with a 15-year fixed rate of 5.0%, it would cost just $127,000 in interest. That is a total savings of roughly $186,000.

5. Loan amount

Mortgage rates on smaller mortgages are typically higher than average rates since those loans are not as profitable for the lender. Since lenders have a higher risk of loss, rates on jumbo mortgages are generally higher, as well. Jumbo loan rates have, however, reversed their trajectory, staying below conforming rates in 2022. This has created better deals for jumbo loan borrowers. In most parts of the US, a jumbo mortgage is any home loan above $726,200.

6. Discount points

In exchange for cash up front, discount points—which cost 1% of the home loan amount—can lower interest rates by roughly 0.25%. 

For example, for a home loan of $200,000, a discount point would cost $2,000 up front. Due to savings earned by a lower interest rate, however, the borrower could recoup the up-front cost over time. Because interest payments play out over time, a homebuyer that wants to sell the property or refinance in a few years could potentially skip over the discount points and pay a higher interest rate for a period.

As we have seen, there are many factors that can affect your mortgage rate. It can be a very tricky road to navigate, and we advise you to speak to the best mortgage professional in your area for assistance. They can help you see the bigger picture. Historical mortgage rates have skyrocketed above 18% and plummeted below 3% since record keeping began in 1971.

Now that you know the economic conditions that impacted mortgage rates—and how those mortgage rates impacted borrowers’ wallets—you will have a better understanding of mortgage rate volatility and, hopefully, stability.

Do you have experience with mortgage rates? Let us know in the comment section below.