What Are The Current Interest Rates?

How high will interest rates get?

I can’t count how many times per week I have to address client concerns about current rates or rate direction. Then I was hit with a realization: most homebuyers today have never seen higher rates!

What are the highest rates have gone?

Today, over 50% of buyers are Millennials or Gen Z. Millennials weren’t in the market in 2008. With the oldest Millennials hitting 40 this year, they would’ve been in their 20s when the market crashed in 2008. The rates of the 1970s/1980s are ancient history to them!

To bring it into perspective, I break out this chart based on rates from Freddie Mac.

What is the average mortgage rate over the last 30 years?

You can see where I edited it to emphasize recent history:

  1. The yellow-shaded area is the Fed’s policy of quantitative easing (QE) to help the country climb out of the great recession sparked by the housing crisis 2008. The government was buying tons of government notes & bonds to shore up the economy, which caused rates to drop precipitously.
  2. The pink-shaded area is the COVID-induced response by the Fed to shore up the economy during the past couple of years. Again, the government’s policy of flooding the market with money caused rates to decline.
  3. With the Fed ceasing purchases of US-backed paper in 2022, we see rates returning to historical norms as inflation hits us hard. Indeed, that is a significant increase in less than a year. Look back to 1977 to see something similar in scope.
  4. But, the silver lining to our gray cloud is that rates have leveled off some. I marked that in Pencil and purple on the far right.
What are current interest rates?

So, where are we? At or below the 50-year average! Unless we have another pandemic or the government decides to prop up the economy, we will not see rates below 5% anytime soon.*

Conclusion

Today’s interest rates should not dissuade consumers from buying now, as rents are increasing faster than mortgage payments. Contact us today for a personalized mortgage plan for your home purchase goals.

(*Rates are subject to change without notice.)

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