The mortgage rate history is generally tied to the robustness of the economy. In a booming economy, more people are able to purchase homes and more people have money to invest in mortgage securities, and this high demand tends to drive interest rates higher. However, in periods of down economies, mortgage rate history suggests that interest rates tend to fall.
Mortgage Rate History
Throughout mortgage rate history, there have been times when the mortgage rates were very high, and times when mortgage rates were very low. In particular, the mortgage crisis that begin in 2007 precipitated a dramatic fall from high interest rates to some of the lowest interest rates in history.
The Great Depression is a good point of reference when considering mortgage rate history, as the depression helped to shape economic policies that remain in force to this day. During this time, interest rates on mortgages were a bit above 5%
When FDR embarked upon the New Deal to resuscitate the economy, housing was one of his primary concerns. As part of the new deal, FDR created the Federal Housing Administration. As the program expanded, more Americans could own homes. Soon, there was a total turnaround in the extent to which a family’s income went towards servicing mortgage debts.
Mortgage debts relative to a family’s total income rose exponentially from 20 percent at the end of the decade of World War II to nearly 75 percent six decades later. This shift occurred because the government began allowing private banks to lend to people who wanted to own houses.
The Government National Mortgage Association, which was established in 1968, and the Federal Home Loan Mortgage Corporation injected more federal funds into the housing industry, which also had a direct bearing on the mortgage loan rate.
Since then, interest rates have fluctuated between around 4 percent to 7 percent. These rates can be volatile and can change dramatically, For example, while the average rate on 30-year fixed rate mortgages for the three-year period ending December 2009 was 4.71%, it oscillated between seven percent in late 2008, the start of the housing crash, and under five percent in late 2009, the lowest from the time of the FHA’s establishment.
Fluctuation Of Mortgage Rates
As the mortgage rate history indicates, rates can be volatile and driven by many different factors. Trying to time the market to get the lowest rates can be financially advantageous, but often difficult to do. While looking at the mortgage rate history can give you an indication of when to buy, you also need to consider your personal situation and readiness to buy a home. These factors should often take precedence over a study of mortgage rate history.
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