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Fixed mortgage rates - 1935 to today

deejayohdeejayoh
edited May 2007 in Housing Bubble
Check it out. I guess I kind of knew this, but it is interesting to see the history. From 1935-1992 the basis is VHA rates. In 1992 they discontinued set prices for those, so the source is CFC.
So since 2001, we're at a pretty close to a historical low - which would drive prices up in any case. Then you add zero-down, ARM, neg-am etc etc etc and you are pouring fuel on the fire.

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Comments

  • mike2mike2
    What I find interesting is that in 2001, the average rate on a 30yr fixed was around 7.25%, only 1.25% higher than now, or around 20% higher than today's average around 6%. 30 yr fixed rates bottomed out around 5.3% in mid 2003, then it bumped around between mid 5's and mid 6's for the next 4 years.

    Based on 30/fixed rates alone, that would allow one to purchase a home 20% to 35% more expensive than you could withthe same payment 6 years ago.

    All of the real action was in the 1 year and 3/1 arms, which dropped to around 3.5% in early 2004.

    Since the variation in fixed rates was fairly insignificant compared to the resulting price appreciation, it's clear that fixed rate mortgages were a significant, but minor driver in the appreciation we've seen since then.
  • deejayohdeejayoh
    Since the variation in fixed rates was fairly insignificant compared to the resulting price appreciation, it's clear that fixed rate mortgages were a significant, but minor driver in the appreciation we've seen since then.

    Totally agree. I just thought it was interesting how low we are in a historical context. Low fixed rates are like the oxygen in the combustion. Adding new wrinkles like 2-year teasers, zero down, etc are the gas on the fire.

    It is interesting how many articles I read where RE types state that the cut-backs due to the Sub-Prime fall out are "over reacting". It's not like zero to 10% down is any sort of historical norm. Heck, I remember when I bought my first house 10 years ago - there was NO way to get in with zero down. 10% was tough, and 20% was normal. You still paid PMI if you didn't have 20% cash, and the lender actually checked where you got your funds. So "over reacting" is kind of a ridiculous statement. I hope we never get out of hand like that again - handing out money like a drunken sailor in a topless bar.
  • georgegeorge
    DeeJay:

    The graph makes me think: ok, two possibilities here. Rates could muddle around about where they are today for a good long while. Or, interest rates could spike again for any number of reasons given world instability:

    http://www.iht.com/articles/2007/03/27/ ... /euros.php

    http://finance.yahoo.com/currency/conve ... amt=1&t=5y
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