As mortgage rates reached staggering heights in 2023, one can't help but wonder: When was the last time rates soared this high, and what happened? Let's rewind into the past to understand the present.
### The 1980s Mortgage Crisis: A Historical Precedent During the early 1980s, the U.S. grappled with a severe economic downturn, partly fueled by an oil embargo and rampant hyperinflation. To combat this, the Federal Reserve hiked short-term interest rates, inadvertently causing a surge in mortgage rates. This period saw rates hitting a record high of 18.63% in October 1981, marking it as one of the most expensive times for borrowing in modern history. ### The Calming '90s and Early 2000s ![When History Repeats: The Mortgage Rate](//images.ctfassets.net/rve58b4kyp9e/7smIMTp7ywU8d9KceJEGyE/f79ffc8f2698a2229af5cd07542cd50a/When_History_Repeats_the_Mortgage_Rate.jpeg) *The ebb and flow of mortgage rates over decades.*
The 1990s brought a breath of relief as the advent of the internet spurred economic growth and reduced inflation. Mortgage rates, which stood at 10.13% in 1990, gradually fell to 6.49% by 1998. This declining trend continued into the 2000s, reaching the high 5% range by 2003. However, the economic prosperity was short-lived, as the 2008 financial crisis plunged the economy into the Great Recession, leading to further drops in mortgage rates. ### The Pandemic Effect The 2010s maintained this trend of low rates, with an average of 3.65% in 2016. Following the onset of the COVID-19 pandemic, the Federal Reserve slashed rates to stimulate the economy, resulting in an average mortgage rate of 2.68% by December 2020. These rates remained low throughout 2021, but since March 2022, there's been a significant uptick, with average rates surpassing 6% in 2023, occasionally reaching above 7%.
Mortgage rates may have hit the roof in 2023, a wild swing from the all-time lows we saw just a couple of years ago. This up-and-down isn't new though – it's just the economy going in cycles. Think of it as the heartbeat of the housing market. __Reference:__ [Historical mortgage rates: 1971 to the present. ](https://www.rocketmortgage.com/learn/historical-mortgage-rates-30-year-fixed)