Mortgage rates are far lower than the historically high levels in the 1980s. Home buyers have seen better days, though, with current rates significantly higher than their sub-3% lows from 2021. As home prices continue to rise, many are forced to put their homeownership dreams on hold.
But for those still on the fence about buying a home, you’re probably wondering — is it the right time to buy a house? Or should you wait until rates are lower? And do historical mortgage rates shed light on what’s to come?
The short answer to all of these questions: It depends. However, steep mortgage rates may not be a deal breaker if your finances are solid and you can afford the payments on a new home loan. Furthermore, there’s no crystal ball to show how rates will move. Still, understanding trends can help you make a more informed decision on when to buy a home — and maybe lift a weight off your shoulders when you realize that, historically speaking, today’s mortgage interest rates aren’t as high as you might think.
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Congress established Freddie Mac in 1970 to expand the secondary mortgage market. Freddie Mac began tracking rates in April 1971.
The average annual rate on a 30-year fixed-rate mortgage reached its highest point at 16.64% in 1981 and dropped to a historic low of 2.96% in 2021. At the time of publication, the average rate sits in the mid-to-high 6% range.
Here’s a closer look at home interest rates over time.
Lowest annual average mortgage rate: 7.38%
Highest annual average mortgage rate: 11.20%
Rates rose steadily from the mid-7% range to roughly 9% in the 1970s. Buyers saw a significant jump to over 11% by the decade’s end. The Great Inflation caused the incline, a period marked by record-high inflation. It spanned from the mid-1960s to the early 1980s and was triggered by the Fed’s monetary expansionary policies implemented during this period.
Lowest annual average mortgage rate: 10.19%
Highest annual average mortgage rate: 16.64%
The upward trend continued into the 1980s, and average mortgage rates reached an all-time high of 16.64% in 1981. The Organization of the Petroleum Exporting Countries (OPEC) issued an oil embargo against the U.S. in the 1970s, and in response, the Fed slashed and increased short-term rates many times throughout the 80s. By the mid-1980s, the average rate started to drop and closed out at 10.32%
Lowest annual average mortgage rate: 6.94%
Highest annual average mortgage rate: 10.13%
Home buyers got a bit of relief in the 1990s. Mortgage rates cooled to just below 7% in 1998, then rose slightly to an average of 7.44% in 1999. Borrowers could thank the dot-com bubble and the rise of the internet for the dip in rates. More specifically, investors moved away from tech stocks and toward bonds and other fixed-income investments, pushing mortgage rates down.
Lowest annual average mortgage rate: 5.04%
Highest annual average mortgage rate: 8.05%
Mortgage rates peaked at 8.05% in the early 2000s before dropping to 5.04% by 2009. The culprits were the economic crash and subsequent Great Recession. Both stemmed from astronomical growth in the housing market, mainly due to the influx of subprime borrowers.
The mortgage payments became too much for these borrowers to handle. Many found themselves underwater on mortgage loans, and the housing market eventually crashed. A wave of foreclosures followed, prompting the Fed to cut rates and stabilize the market. This is the perfect example of the general rule that mortgage rates decrease when the economy struggles.
Learn more: When will the housing market crash again?
Lowest annual average mortgage rate: 3.65%
Highest annual average mortgage rate: 4.69%
Mortgage rates remained low this decade. They temporarily reversed course in 2014 and again in 2018, with average rates at 4.17% and 4.54%, respectively — still four times lower than the all-time high. The decade ended with an average slightly below 4%.
Lowest annual average mortgage rate: 2.96%
Highest annual average mortgage rate: 6.81%
The COVID-19 pandemic ushered in record-low rates, largely due to the Federal Reserve cutting the federal funds rate to make borrowing attractive again. Unfortunately, these enticing rates were short-lived, as the Fed followed up its actions with several rate hikes between March 2022 and July 2023.
Rate hikes made home loans more expensive. The average spiked to 5.54% in 2022, followed by another increase to 6.81% in 2023. A rate cut in September 2024 caused the rate to dip to 6.72% that year.
Despite these changes in recent years, rates haven’t returned to their pre-pandemic levels and are among the highest since 2002.
Mortgage rates can fluctuate daily. Multiple factors affect mortgage interest rates, and here are some of the most common:
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Federal funds rate: Mortgage rates typically increase when the Fed rate increases and decrease when the Fed rate decreases.
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10-year Treasury yield: Because mortgages are longer-term loans, their rates follow the 10-year Treasury yield’s movements even more than shorter-term yields (like the fed funds rate).
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Inflation: You’ll usually see mortgage rates increase when inflation rises more aggressively than economists expect.
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Global events: Investors’ perceptions of events like the U.S. presidential election or tariffs imposed on other countries can impact home loan rates either way.
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Economic conditions: Mortgage interest rates tend to increase when the economy thrives and decrease when the economy struggles.
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Job market: Since the job market is part of the overall economy, rates tend to increase when the job market is doing well.
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Home-buyer demand: The more demand in the housing market, the higher the rates.
These are factors you can’t control. However, a mortgage lender may give you a better interest rate if your personal finances are strong.
A mortgage lender’s advertised rate may not be the one you receive. It depends on several personal factors, including your credit score, down payment, debt-to-income (DTI) ratio, and cash reserves (if applicable). Loan type also plays a role in the mortgage rate you’re offered. For example, VA loans often have lower interest rates than conventional loans.
Read more: The best mortgage lenders for first-time home buyers
When rates are low, homeownership becomes more attractive, driving up demand. Home prices also follow suit as more prospective buyers hit the market.
Still, lower borrowing costs mean access to more buyer power and lower monthly mortgage payments. Keep in mind that the lowest mortgage rates are generally reserved for well-qualified borrowers with strong credit scores.
Refinancing a mortgage makes sense when rates drop, but only if you qualify for a better deal. It isn’t a hard-and-fast rule, but many say you should consider refinancing if you can secure a rate reduction of at least 1%. If you plan to move soon, though, the costs of refinancing could outweigh the long-term benefits.
Mortgage rates fluctuate with economic conditions, and there’s no surefire way to time the market or predict when rates will shift. Ideally, you want to purchase when rates are low to keep borrowing costs in check. However, buying a home is not necessarily a bad idea when rates are higher if your finances are in solid shape.
Current rates haven’t returned to the pre-pandemic levels. Still, they remain well below the record highs in the late 1970s, 1980s, and 1990s. And if you decide to buy a home before rates drop, refinancing into a lower rate later is always an option — provided your finances are up to par.
Learn more: 6 times when it makes sense to refinance your mortgage
Inflation and Fed rate hikes in recent years have kept mortgage rates elevated. However, even though mortgage rates may seem very high, they’re low compared to the rates from the 1970s, 1980s, and 1990s.
As of April 2025, the average mortgage rate on a 30-year fixed-rate loan is in the mid-to-high 6% range. Any rate around or below this number could be considered “good.”
It’s impossible to predict future mortgage trends with certainty. But if mortgage rates were to drop below 3% again, it would likely result from a major economic event, like the COVID-19 pandemic.
According to Freddie Mac, the lowest average weekly rate on a 30-year fixed mortgage was 2.65% in 2021 due to a Fed rate cut prompted by the COVID-19 pandemic. The cut was made to address economic uncertainty and persuade consumers to increase spending and borrowing levels, aiming to stimulate the economy.
This article was edited by Laura Grace Tarpley.
