Are Today's Mortgage Rates Really That Historically High?

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  • Mortgage borrowers enjoyed record-low rates from mid-2020 through late 2021.
  • While today's rates are higher, historically speaking, they're actually pretty reasonable.

In the grand scheme of mortgages, today's rates aren't so bad.

There's a reason mortgage demand increased so much in mid-2020. At that point, mortgage rates started plunging to record lows, and buyers were eager to snag an affordable home loan while they could. Meanwhile, mortgage rates stayed nice and low throughout 2021, giving home buyers more opportunity to borrow affordably.

But things changed in 2022. Since the start of the year, mortgage rates have been climbing, and as of this writing, the average 30-year mortgage is sitting at around 5%. When we compare that to the rates borrowers were able to snag from mid-2020 through late 2021, a 5% borrowing rate seems high. But historically speaking, it's actually not such a bad rate.

Should a 5% mortgage rate send borrowers running?

It's easy to see why a 30-year mortgage at 5% would cause a notable decline in buyer demand. From mid-2020 through the start of 2022, buyers enjoyed attractive rates -- rates that then shot upward at a rapid clip over the past few months. But when we dig deeper, we can see that snagging a 30-year mortgage at 5% isn't necessarily the rotten deal it might seem like.

In January 2019, the average 30-year loan sat at 4.46%, according to Freddie Mac. Certainly that's lower than what borrowers are looking at today -- but not extremely so. Meanwhile, if we go back in time to 2009, the average 30-year mortgage rate was 5.04%. In 2008, it was 6.03%. And between 2003 and 2007, it ranged from 5.83% to 6.41%.

Now to be fair, it has been a while since the average 30-year mortgage rate was hovering in the 5% range. But also, it's not like a 5% rate is unheard of. Plus, if we go back even further, in 2000, the average 30-year mortgage rate was 8.05%. In 1990, it was 10.13%. And in 1984, it was 13.88%.

Borrowers need to take today's mortgage rates in context. Yes, they're higher than they've been in a while, and that stinks. But there have been plenty of years when rates sat at levels that are comparable or much higher.

Snagging the best deal

While 5% mortgage rates may be nothing new, they can still be a hard pill to swallow. Borrowers who are eager to reap savings on a home loan should take steps to snag the lowest mortgage rate possible when buying a home. They can do so by raising theircredit scores, paying down existing debt, and boosting their income when possible.

Shopping around with different mortgage lenders is another good way to eke out some savings at a time when rates are higher. Ultimately, each lender sets its own rate based on different criteria, so seeking out multiple offers is another easy way to potentially end up with a more affordable home loan.

Will rates drop back down?

There's no reason to think mortgage rates won't drop eventually. In the near term, those looking at a 30-year mortgage may have to resign themselves to a rate in the 5% range. That's due to a number of factors, including plans on the part of the Federal Reserve to implement rate hikes this year. But in time, that average rate could drop back down, making borrowing even more affordable.

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