30 Year Fixed Rates Yearly Average From 1971 to present:1971: 7.6
1972: 7.38
1973: 8.04
1974: 9.19
1975: 9.05
1976: 8.87
1977: 8.85
1978: 9.64
1979: 11.20
1980: 13.74
1981: 16.63.................wow
1982: 16.04
1983: 13.24
1984: 13.88
1985: 12.43
1986: 10.19
1987: 10.21
1988: 10.34
1989: 10.32
1990: 10.13
1991: 9.25
1992: 8.39
1993: 7.31
1994: 8.38
1995: 7.93
1996: 7.81
1997: 7.6
1998: 6.94
1999: 7.44
2000: 8.05
2001: 6.97
2002: 6.54
2003: 5.83
2004: 5.84
2005: 5.87
2006: 6.41
2007: 6.34
2008: 6.25
Why Do Mortgage Rates Change?
When the Federal Reserve "cuts rates", they are typically cutting the Discount rate and the Fed Funds rate. Many misunderstand this "cut" to mean that mortgage rates were cut. Mortgage rates are affected by many factors but are not "cut" by the Fed. There are many types of interest rates.
Prime rate: The rate offered to a bank's best customers.
Treasury bill rates: Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of 3 months, 6 months and 1 year. Each treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate).
Treasury Notes: Intermediate-term debt instruments used by the U.S. Government to finance their debt. They come in denominations of 2 years, 5 years and 10 years.
Treasury Bonds: Long-debt instruments used by the U.S. Government to finance its debt. Treasury bonds come in 30-year denominations.
Federal Funds Rate: Rates banks charge each other for overnight loans.
Federal Discount Rate: Rate New York Fed charges to member banks.
Libor: London Interbank Offered Rates. Average London Eurodollar rates.
6 month CD rate: The average rate that you get when you invest in a 6-month CD.
11th District Cost of Funds COFI: Rate determined by averaging a composite of other rates.
Fannie Mae-Backed Security rates: Fannie Mae pools large quantities of mortgages, creates securities with them, and sells them as Fannie Mae-backed securities. The rates on these securities influence mortgage rates very strongly.
Ginnie Mae-Backed Security rates: Ginnie Mae pools large quantities of mortgages, secures them and sells them as Ginnie Mae-backed securities. The rates on these securities influence mortgage rates on FHA and VA loans.
A major factor driving interest rates is inflation. Higher inflation is associated with a growing economy. When the economy grows too strongly, the Federal Reserve increases interest rates to slow the economy down and reduce inflation. Inflation results from prices of goods and services increasing. When the economy is strong, there is more demand for goods and services, so the producers of those goods and services can increase prices. A strong economy therefore results in higher real-estate prices, higher rents on apartments and higher mortgage rates.
Mortgage rates tend to move in the same direction as interest rates. However, actual mortgage rates are also based on supply and demand for mortgages. The supply-and-demand equation for mortgage rates may be different from the supply-and-demand equation for interest rates. This might sometimes result in mortgage rates moving differently from other rates. For example, one lender may be forced to close additional mortgages to meet a commitment they have made. This results in them offering lower rates even though interest rates may have moved up.
