Benchmark Mortgage Rate Since 1971

The average rate for a 30-year mortgage ticked down six basis points to 3.42 percent over the past week and is now running 43 basis points below the 3.85 percent rate in place at the same time last year and within 11 basis points of its 3.31 percent all-time low recorded in November of 2012, according to data from Freddie Mac’s latest Primary Mortgage Market Survey.

According to an analysis of the futures market, the probability of the Fed enacting a rate hike by the end of the year, a probability which had dropped to below 35 percent at the beginning of August remains around 58 percent following the Federal Open Market Committee’s announcement last week.

Keep in mind that the rate for a 30-year fixed mortgage has averaged closer to 6.4 percent since 1990 and 8.3 percent over the past 45 years.

Comments from Plugged-In Readers

  1. Posted by Notcom

    “Mortgage rates have reached what looks like a permanently low plateau.”

  2. Posted by eddy

    1990 (26 years) is sort of an arbitrary date to pick and not particularly relevant given modern monetary policies and 45% is an even more random number to pick as almost anyone would refinance into a modern loan at a modern rate. A 10 or 20 year look back is probably more relevant in terms of trends and potential mean reversion. It’s pretty clear that the country is hooked on low interest rates and despite the feds efforts to nudge them back up they are continually met with resistance. The days of 6% mortgages are not in our short term horizon and anything sub 5% is going to continue to fuel the markets. I’d like to see the chart on 3, 5 and 7 year ARMs over the past 20 years.

    • Posted by Notcom

      Could you clarify this “nudging” you speak of ?? I recall one trivial rise in the overnight rate during the past year or so….several years after the (last) Recession had officially ended.

      As for the quality – or lack of same – of the data provided, it does after all, show rates going back 45 years – which I presume is the extent of the data readily available; though I would add to your complaints by pointing out that it only shows nominal rates…”real” rates might make the picture look less Alpinian.

      • Posted by jack

        I apologize if I missed it somewhere previously: can you explain what you meant by “real” rates, and where does one go and see a similar trend graph?

        • Posted by JR "Bob" Dobbs

          The real interest rate is the rate after accounting for inflation. It is an important concept to keep in mind.

          To illustrate: a 10% loan in a world of 7% inflation has a real interest rate of 3%. A 4% loan in a world of 0% inflation has a real rate of 4%. Thus, the real interest rate of the 4% loan is higher than the 10% loan. Real rates have not varied as much as nominal rates.

          • Posted by Notcom

            Thanks, JR. Yes.
            I might add, however, that while the concept is pretty straightforward in terms of short-term loans, it’s somewhat confusing – to me at least – w/ reference to longer term loans….like mortgages. Although there is a certain average inflation which will occur during the term, it isn’t known ahead of time; there is an expectation, but it might not – probably won’t – turn out as expected…so one could speak of “real” rates as either “real actual” or “real expected” rates, and they would likely be different.

          • Posted by incog

            This is usually referred to as ‘ex-post’ and ‘ex-ante

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