Rates go up and they go down and they go up again. It’s a constant cycle, and if history and the charts below are a guide, then we optimistically anticipate rates could begin to drop as early as next year. This anticipation of lower rates in the future is one of the reasons we generally are not in favor of paying much in points for your rate.
You are not stuck with your mortgage rate forever. Qualified homeowners have the option to refinance when rates drop, and you should be happy to know that we keep tabs on loans we have closed for our clients, looking for opportunities to do either a low-cost or no-cost refinance in the future.
During 2020-2021 we saw the lowest interest rates in history due to emergency actions taken by the Federal Reserve during the pandemic that brought rates down under 3.00%. But in 2022, a strong economy, low unemployment, supply chain issues, high prices, and inflation surging to four-decade highs spurred the Federal Reserve to take aggressive actions and rates increased very quickly as a result. The 2022 rate hike cycle is the fastest in history.
The Fed has made it clear they are committed to hiking interest rates until inflation is under control. Mortgage interest rates are not directly controlled by the Fed, but when the Fed raises rates, money gets more expensive and pushes mortgage rates higher as well.
Once the Fed has inflation under control, we expect to see rates begin to fall. The Fed’s actions to curb inflation could unfortunately cool the economy more than desired and lead us into a recession, which would also bring mortgage interest rates down.
The 2 charts below will show you:
Chart #1 – 30 year fixed rate mortgages going back to 1974
Chart #2 – prime rates, which are directly impacted by the Fed’s actions, going back to 2001.
Chart #1
| Year | Average 30 Year Fixed Mortgage Rate | Previous Year | Change vs. LY |
| 2022 | 7.12% | 2.96% | 4.16% |
| 2021 | 2.96% | 3.10% | -0.14% |
| 2020 | 3.10% | 3.94% | -0.84% |
| 2019 | 3.94% | 4.54% | -0.60% |
| 2018 | 4.54% | 3.99% | 0.55% |
| 2017 | 3.99% | 3.65% | 0.34% |
| 2016 | 3.65% | 3.85% | -0.20% |
| 2015 | 3.85% | 4.17% | -0.32% |
| 2014 | 4.17% | 3.98% | 0.19% |
| 2013 | 3.98% | 3.66% | 0.32% |
| 2012 | 3.66% | 4.45% | -0.79% |
| 2011 | 4.45% | 4.69% | -0.24% |
| 2010 | 4.69% | 5.04% | -0.35% |
| 2009 | 5.04% | 6.03% | -0.99% |
| 2008 | 6.03% | 6.34% | -0.31% |
| 2007 | 6.34% | 6.41% | -0.07% |
| 2006 | 6.41% | 5.87% | 0.54% |
| 2005 | 5.87% | 5.84% | 0.03% |
| 2004 | 5.84% | 5.83% | 0.01% |
| 2003 | 5.83% | 6.54% | -0.71% |
| 2002 | 6.54% | 6.97% | -0.43% |
| 2001 | 6.97% | 8.05% | -1.08% |
| 2000 | 8.05% | 7.44% | 0.61% |
| 1999 | 7.44% | 6.94% | 0.50% |
| 1998 | 6.94% | 7.60% | -0.66% |
| 1997 | 7.60% | 7.81% | -0.21% |
| 1996 | 7.81% | 7.93% | -0.12% |
| 1995 | 7.93% | 8.38% | -0.45% |
| 1994 | 8.38% | 7.31% | 1.07% |
| 1993 | 7.31% | 8.39% | -1.08% |
| 1992 | 8.39% | 9.25% | -0.86% |
| 1991 | 9.25% | 10.13% | -0.88% |
| 1990 | 10.13% | 10.32% | -0.19% |
| 1989 | 10.32% | 10.34% | -0.02% |
| 1988 | 10.34% | 10.21% | 0.13% |
| 1987 | 10.21% | 10.19% | 0.02% |
| 1986 | 10.19% | 12.43% | -2.24% |
| 1985 | 12.43% | 13.88% | -1.45% |
| 1984 | 13.88% | 13.24% | 0.64% |
| 1983 | 13.24% | 16.04% | -2.80% |
| 1982 | 16.04% | 16.63% | -0.59% |
| 1981 | 16.63% | 13.74% | 2.89% |
| 1980 | 13.74% | 11.20% | 2.54% |
| 1979 | 11.20% | 9.64% | 1.56% |
| 1978 | 9.64% | 8.85% | 0.79% |
| 1977 | 8.85% | 8.87% | -0.02% |
| 1976 | 8.87% | 9.05% | -0.18% |
| 1975 | 9.05% | 9.19% | -0.14% |
The Prime Rate is directly impacted by Fed rate changes. This chart shows every Fed rate hike or reduction going back to 1974.
Chart #2
| Year | Effective Date | Change | Prime Rate |
| 2022 | 9/22/2022 | 0.75% | 6.25% |
| 2022 | 7/28/2022 | 0.75% | 5.50% |
| 2022 | 6/16/2022 | 0.75% | 4.75% |
| 2022 | 5/5/2022 | 0.50% | 4.00% |
| 2022 | 3/17/2022 | 0.25% | 3.50% |
| 2020 | 3/16/2020 | -1.00% | 3.25% |
| 2020 | 3/4/2020 | -0.50% | 4.25% |
| 2019 | 10/31/2019 | -0.25% | 4.75% |
| 2019 | 9/19/2019 | -0.25% | 5.00% |
| 2019 | 8/1/2019 | -0.25% | 5.25% |
| 2018 | 12/20/2018 | 0.25% | 5.50% |
| 2018 | 9/27/2018 | 0.25% | 5.25% |
| 2018 | 6/14/2018 | 0.25% | 5.00% |
| 2018 | 3/22/2018 | 0.25% | 4.75% |
| 2017 | 12/14/2017 | 0.25% | 4.50% |
| 2017 | 6/15/2017 | 0.25% | 4.25% |
| 2017 | 3/16/2017 | 0.25% | 4.00% |
| 2016 | 12/15/2016 | 0.25% | 3.75% |
| 2015 | 12/17/2015 | 0.25% | 3.50% |
| 2008 | 12/16/2008 | -0.75% | 3.25% |
| 2008 | 10/29/2008 | -0.50% | 4.00% |
| 2008 | 10/8/2008 | -0.50% | 4.50% |
| 2008 | 4/30/2008 | -0.25% | 5.00% |
| 2008 | 3/18/2008 | -0.75% | 5.25% |
| 2008 | 1/30/2008 | -0.50% | 6.00% |
| 2008 | 1/22/2008 | -0.75% | 6.50% |
| 2007 | 12/11/2007 | -0.25% | 7.25% |
| 2007 | 10/31/2007 | -0.25% | 7.50% |
| 2007 | 9/18/2007 | -0.50% | 7.75% |
| 2006 | 6/29/2006 | 0.25% | 8.25% |
| 2006 | 5/10/2006 | 0.25% | 8.00% |
| 2006 | 3/28/2006 | 0.25% | 7.75% |
| 2006 | 1/31/2006 | 0.25% | 7.50% |
| 2005 | 12/13/2005 | 0.25% | 7.25% |
| 2005 | 11/1/2005 | 0.25% | 7.00% |
| 2005 | 9/20/2005 | 0.25% | 6.75% |
| 2005 | 8/9/2005 | 0.25% | 6.50% |
| 2005 | 6/30/2005 | 0.25% | 6.25% |
| 2005 | 5/3/2005 | 0.25% | 6.00% |
| 2005 | 3/22/2005 | 0.25% | 5.75% |
| 2005 | 2/2/2005 | 0.25% | 5.50% |
| 2004 | 12/14/2004 | 0.25% | 5.25% |
| 2004 | 11/10/2004 | 0.25% | 5.00% |
| 2004 | 9/21/2004 | 0.25% | 4.75% |
| 2004 | 8/10/2004 | 0.25% | 4.50% |
| 2004 | 6/30/2004 | 0.25% | 4.25% |
| 2003 | 6/27/2003 | -0.25% | 4.00% |
| 2002 | 11/7/2002 | -0.50% | 4.25% |
| 2001 | 12/12/2001 | -0.25% | 4.75% |
| 2001 | 11/7/2001 | -0.50% | 5.00% |
| 2001 | 10/3/2001 | -0.50% | 5.50% |
| 2001 | 9/17/2001 | -0.50% | 6.00% |
| 2001 | 8/22/2001 | -0.25% | 6.50% |
| 2001 | 6/28/2001 | -0.25% | 6.75% |
| 2001 | 5/16/2001 | -0.50% | 7.00% |
| 2001 | 4/19/2001 | -0.50% | 7.50% |
| 2001 | 3/21/2001 | -0.50% | 8.00% |
| 2001 | 2/1/2001 | -0.50% | 8.50% |
| 2001 | 1/4/2001 | 0.25% | 9.00% |