Normal mortgage rates? The average mortgage rate since 1972 is around 7.75% Loaner

Lately, I’ve heard a lot of people say that mortgage rates are “average” or “normal.”

As in, they are neither high nor low. They’re just typical.

This is usually in response to someone pointing out that they are much higher than they were just a few years ago.

In some ways, this feels like a rejection that rates are high today. And it’s usually accompanied by something like: “Do you know how high rates were when I bought my first house?!” »

The problem is that it is useless. It doesn’t matter what they were decades ago. Or what is their average since the 1970s?

What is the historical average mortgage rate over 30 years?

Although the long-term average of the 30-year fixed rate doesn’t necessarily matter, I might as well tell you.

I’ve done research and spent time with spreadsheets compiling Freddie Mac’s historical data, so it would be a waste not to share it.

Since 1972, the first full year, Freddie Mac has compiled mortgage rate data, through the end of 2023, the 30-year fixed rate averages around 7.75%.

Technically 7.74%, but who’s counting (a single basis point)?

At last glance, the 30-year average was 6.78%, according to the company’s latest weekly primary mortgage market survey (PMMS).

So someone could probably tell you that the rates aren’t that high. high at present. After all, they are about a percentage point below their long-term average.

They might also point out those famous double-digit 1980s mortgage rates.

But does that mean anything to the potential home buyer facing record prices today? Or the recent home buyer looking for relief via rate and term refinancing?

Probably not. It’s really just educational. Or a sales mechanism to make you believe the rates aren’t that bad.

I don’t like it when people say mortgage rates are average (or normal)

As I pointed out earlier, many people think that mortgage rates today are average. Or normal.

In other words, don’t worry. They are fine. They’re pretty good. They were worse. Blah blah blah.

The problem is that this does not reflect recent levels, when they were in the 2-3% range. It also largely ignores that rates have been in the 2-4% range for much of the last decade.

Although people might forget, you could get a 30-year fixed loan in the high 2% range as early as 2012 and 2013.

This wasn’t just a pandemic fluke. Simply put, extremely low mortgage rates have existed for a long time in recent history.

Basically, since the mortgage crisis of the early 2000s, they have been very low.

It wasn’t until mid-2022 that fixed mortgage rates increased, meaning this is still a relatively new development.

And that’s something many potential buyers (and existing homeowners) are still reconciling.

So tell someone, “Relax, it’s normal. » Or that they are “average” doesn’t bring much comfort.

They might as well respond by saying, “Well, they were 2% a few years ago and now they’re 7%.” »

It was not just about the scale of change, but also its speed. Mortgage rates have more than doubled in less than a year.

And almost tripled in less than two years. This is unprecedented, although the rates pale in comparison to the double-digit rates seen in the 1980s.

Just tell people the truth about mortgage rates

If you work in the mortgage industry or are a real estate agent, don’t tell people that mortgage rates are average or normal.

Just be honest and tell them that they are much higher than before. This level of transparency can work to your advantage.

You’re not trying to get them to buy a house or take out a mortgage. You are meant to be their guide and ally, someone who helps them understand an ever-changing market.

And if you take this approach, it could make you stand out from the crowd.

I will never forget a real estate agent I met who told me not to sell a property. She said to hold it for the long term and let it appreciate in value.

She intentionally missed the list because she was being honest. If/when I sell this property, it will be at the top of my list for this reason.

The same goes for someone who needs a mortgage. Being honest could help you acquire their business in the future, even if not today.

Additionally, they can refer you to family, friends, colleagues, etc. So there’s absolutely no harm in calling a spade a spade here.

Give them the complete picture. Show them where rates are today, where they were a year ago, two years ago, and where they could be in 2025 and beyond.