The Historic Context of Mortgage Rates

The national real estate market has reeled at the sharp increase in mortgage rates, as 30-year fixed mortgage rates have topped 7% for the first time in over twenty years. 

Sounds bad, and it has many wondering if numbers will continue to get worse.

Freddie Mac has compiled the average rates on mortgages, organized by month and year, and from 30-year fixed rates, 15-year fixed rates, and 5-year adjustable rates. The first thing that jumps out at even a casual glance at these tables is just how low the rates have been for the past fourteen years. 

The annual rate for a 30-year fixed mortgage was at 6.03%, and then, in the wake of the economic mess that was 2008, the annual rate steadily decreased until it hovered around 4%, with only a minor spike to 4.54% in 2018. 

For additional context, after the 1981 housing crash mortgage rates peaked at a truly astonishing 18% during parts of that year, as a result of the Federal Reserve fighting the inflation that characterized the 1970’s economy. After that peak, the mortgage rates followed a similar pattern to the post-2008 trend, with the rates declining before leveling out during the 1990’s, this time at around the 7-8% mark, which is where that 2002, 20-year mark for the last time the rate was over 7% derives. 

In terms of historical context, mortgage rates have actually been quite low, and for a good long while to boot. In 2020, the rate dipped below 3%. But then Covid happened, and disrupted the market conditions that made such rates feasible.

“The Federal Reserve made the decision based on what was happening in the world,” Melanie Mullins, Affiliate Director at the Huntsville Area Association of Realtors, told the HBJ. “Low inflation led to lower rates, and then we had Covid. Interest rates are rising right now because inflation is surging – not just here, but internationally as well. I would expect growth to slow as the Fed continues to raise rates.” 

With that said, a slower rate of growth may not, on the whole, be such a terrible thing. The housing market leading up to the 2008 crash was a wild, largely unregulated frenzy, and when it finally broke apart, it took the global economy with it. Housing prices doubling in two years is neither normal nor sustainable. As painful as it may be, it is better to take a sharp hit now, instead of facing an unmitigated financial catastrophe later.

That’s a hard sell to a public that is prone to panic at the first sign of trouble, and that demands that everything be sunshine and peaches for forever and ever. Fortunately, I’m not running for office, so I can be upfront about this sort of thing. 

Fortunately, Huntsville’s position as a hub for Federal spending provides some degree – emphasis on ‘some degree’ – of insulation to a likely recession, as the need for technicians to service the government’s needs, and the need for other industries to service the needs of said technicians, results in a continued demand for housing in and around Huntsville. This is not inexhaustible, nor is it total, but it does put Huntsville in a better position relative to a lot of cities in the United States. 

So yes, the waters are choppy, and storm clouds are gathering, but Huntsville does have the tools to weather the storm.