Thirty-year rates tipped above 5% in April for the first time in a decade. AND, mortgage rates are still relatively low from a historical standpoint.
Previously, 30-year fixed rates averaged just under 8%. So even though today’s rates are hovering above 5%, they’re still a good deal comparatively!
1981 was the worst year for mortgage interest rates on record
How bad is bad? The average mortgage rate in 1981 was 16.63%. And that’s just the average — some people paid more. For the week of Oct. 9, 1981, mortgage rates averaged 18.63%, the highest weekly rate on record, and almost five times the 2019 annual rate.
And the best year? Mortgage interest rates fell to record lows in 2020 and 2021 during the pandemic. By July 2020, the 30-year fixed rate fell below 3% for the first time. And it kept falling to a new record low of just 2.65% in January 2021.
2022: Mortgage rates spike
Thanks to sharp inflation growth, higher benchmark rates, and a drawback on mortgage stimulus by the Fed, mortgage rates spiked in the first six months of 2022.
According to Freddie Mac’s records, the average 30-year rate jumped from 3.76% to 5.78% between March 3 and June 16 — an increase of more than 200 basis points (2%) in just three months.
Will mortgage rates go up after next week's Fed meeting?
Last month, the Fed said it plans to hike its rates at each of its remaining meetings. Some “experts” are predicting the Fed may raise the borrowing rate by a whole point! Making that the largest one-time increase in decades!
Those who are in a position to lock an interest rate sooner rather than later may be wise to do so, as rates could continue to increase throughout the year. Where they’ll plateau, it’s impossible to say.
Sellers: Consider offering incentives to buyers that may include credits back from the purchase price, so a buyer can "buy down" their mortgage interest rate. This could make the difference in a buyer’s affordability and your home selling sooner.
I’ll address next week’s Fed meeting results in another article. Until next time…
