How Mortgage Rates Have Changed Over Time

• Author: Chris Remington
• Posted: 2024-12-16

The Federal Reserve doesn't directly control the interest rate for fixed mortgages, but the rate it sets is closely related to the 10-year Treasury yield. While the Fed's aggressive stance against inflation is often the driving force behind mortgage rates, this doesn't always guarantee stability. Despite its recent action, mortgage rates are expected to rise in July, continuing their seven-month streak. As long as inflation remains low, potential home buyers should be pleased.

While the Federal Reserve has raised interest rates to combat inflation, mortgage rates generally follow the same general trend as the overall market. However, due to recession fears, mortgage rates have become more volatile. Buying a home should only be considered financially sound if you're ready to make the payment. The mortgage rate trend is also based on the economy, which is booming right now. As long as you can make the monthly mortgage payment, you should have no trouble buying a new home.

The 30-year fixed mortgage rate peaked at 18.4 percent in October 1981. This was fueled by the dot-com bubble, which had caused many people to buy overvalued stocks. Once the bubble burst, investors shifted to bonds, which increased in price as the yields on bonds decreased. The mortgage rate peaked at 18.4 percent in October 1981 and sawsawed back to the nine-percent range by 1986. By the end of the decade, the 30-year fixed mortgage rate dipped to a low of 9.78 percent.