Mortgage rates have dropped again to record lows on both 30-year and 15-year fixed rates. Freddie Mac reports the average rate for a 30-year mortgage dropped to 3.56%. That’s down from 4.51% this time last year. The rate on 30-year loans has fallen to or matched record lows 11 of the past 12 weeks. The 15-year fixed rate fell to 2.86%.
These rates are the lowest since long-term mortgages began in the 1950s. Freddie Mac says the 30-year fixed mortgage is an incentive for first-time homebuyers who want lower monthly payments. The low rates have contributed to a modest housing recovery this year, which I wrote about here yesterday.
We’re getting so accustomed to low mortgage rates that many of the current homebuyers and homeowners might not realize or remember that they haven’t always been this low. Bankrate.com did a brief history of mortgage interest rates, and it includes an especially painful period 30 years ago. Bankrate says:
In the early 1980s, mortgage interest rates brushed the stratospheric highs of 18 percent and even 19 percent. Imagine trying to get a home loan with an interest rate of 18 percent. At that rate, the mortgage interest deduction would be a very lucrative income tax perk, but the monthly payment on a loan would be far more painful than a typical mortgage payment today.
Many of us remember those days. I was trying to buy my first home. Want to see how a comparison between then and now looks on paper? 18% vs. 3.56%? On a $200,000 loan the monthly payment is roughly $3000 (18%) vs. only $900 (3.56%). A savings of more than $2000 every month!!
Think about that the next time you’re waiting to buy or refinance hoping rates go even lower. We’ve never had it so good.