Mortgage Rate Trends: A Historical Perspective and Future Possibilities

Lisa Mailhot  |  September 6, 2023

Buyers

Mortgage Rate Trends: A Historical Perspective and Future Possibilities

 

If you're planning to purchase a home this year, you're likely closely monitoring mortgage rates. These rates play a pivotal role in determining your home loan's affordability, and in today's challenging market, it's prudent to examine how mortgage rates compare historically and their potential trajectory. Furthermore, delving into their correlation with inflation can offer valuable insights into their future direction.

Providing Context for Rate Fluctuations

Since April 1971, Freddie Mac has diligently tracked the 30-year fixed mortgage rate. Weekly, they release their findings in the Primary Mortgage Market Survey, which consolidates mortgage application data from lenders nationwide (as depicted in the graph below):

 

Examining the graph's right side reveals a notable uptick in mortgage rates since the beginning of the past year. Despite this increase, today's rates remain below the 52-year average. While this historical perspective offers valuable context, prospective buyers have grown accustomed to mortgage rates ranging between 3% and 5%, a range they have held for the past 15 years.

This point is significant because it elucidates why recent rate increases might feel surprising, despite them being relatively close to the long-term average. Although many buyers have adapted to these elevated rates over the past year, a slightly lower rate would be warmly welcomed. To gauge whether this is a realistic prospect, it's imperative to assess the inflationary landscape.

Potential Trajectory of Mortgage Rates

Since early 2022, the Federal Reserve has been diligently working to curb inflation. This is noteworthy because, historically, there exists a correlation between inflation and mortgage rates (consult the graph below):

This graph unveils a rather dependable connection between inflation and mortgage rates. Turning attention to the left side of the graph, it's evident that whenever inflation experiences significant fluctuations (highlighted in blue), mortgage rates subsequently follow suit (highlighted in green).

The circled section of the graph highlights the recent spike in inflation, closely trailed by a corresponding increase in mortgage rates. As inflation has somewhat stabilized this year, mortgage rates have yet to mirror this trend.

This suggests that, based on historical patterns, the market anticipates mortgage rates aligning with inflation and eventually decreasing. While accurately predicting the exact trajectory of mortgage rates is challenging, the moderation of inflation implies that lower mortgage rates in the near future would align with a well-established historical pattern.

Bottom Line

To gain insights into the potential direction of mortgage rates, it's advantageous to analyze their historical trajectory. A clear correlation between inflation and mortgage rates exists, and if this historical relationship holds true, the recent reduction in inflation may bode well for the future of mortgage rates and your aspirations of homeownership.


Recent Blog Posts

Stay up to date on the latest real estate trends.

Buyers

Navigating Lessons from the Real Brokerage Settlement's Shifting Landscape

Lisa Mailhot  |  April 12, 2024

Discover insights into the recent $9.25 million settlement between Real Brokerage and commission suits. Learn about the implications for buyers, sellers, and agents in… Read more

Buyers

Hot Vacation Home Markets Ripe for Investment in 2024

Lisa Mailhot  |  April 12, 2024

Discover the top vacation home markets across the U.S. experiencing remarkable price appreciation in 2024. Learn how to capitalize on these trending destinations as an… Read more

Buyers

New Rules Shine a Light on Cash Deals in Real Estate

Lisa Mailhot  |  April 11, 2024

The U.S. government is tightening regulations to combat money laundering in residential real estate transactions. This blog explores the proposed rules requiring real … Read more

Buyers

A Beginner's Guide to Building Wealth and Financial Wellness

Lisa Mailhot  |  April 10, 2024

Discover how to kickstart your financial journey with expert advice from Tiffany Aliche, The Budgetnista. Learn three essential steps to release financial shame, seek … Read more

Buyers

Embrace Luxury Living in Pasadena's Brantwood for Active Seniors

Lisa Mailhot  |  April 9, 2024

Discover Brantwood, a luxurious 55-unit apartment complex in Pasadena's vibrant Playhouse Village, offering all-inclusive lease plans and boutique hotel-style service… Read more

Buyers

Shifting Grounds in Real Estate After NY Lawsuit

Lisa Mailhot  |  April 8, 2024

Dive into the heart of a groundbreaking antitrust lawsuit in New York that could redefine real estate transactions nationwide. This blog post offers a comprehensive an… Read more

Buyers

Celebrating Endurance and Vision: Lessons from 50 Years in Real Estate

Lisa Mailhot  |  April 5, 2024

Explore the journey and insights of William Raveis, a real estate visionary, who has led his brokerage to success over five decades. Learn the secrets of endurance, in… Read more

Buyers

America's Hottest Housing Markets Signs of Cooling Off

Lisa Mailhot  |  April 4, 2024

Renters often feel limited in making their homes eco-friendly, but there are small steps you can practice to reduce your carbon footprint and live more sustainably, ev… Read more

Buyers

Thriving Through Turmoil: Realtors' Guide to Crisis Management 

Lisa Mailhot  |  April 3, 2024

Learn essential crisis management tips for handling commission uncertainty in the ever-changing real estate landscape. Gain insights from industry expert Julia Lashay … Read more

Let’s Talk

You’ve got questions and we can’t wait to answer them.