Home mortgage interest rates have fluctuated from very high to extremely low over the years. The past few years have seen very low mortgage interest rates, held in place partially by the process known as "quantitative easing" exercised by the Federal Reserve. At some point, interest rates will rise again, but for now the mortgage industry continues to enjoy very affordable borrowing.
The History of the Prime Rate
The interest rate known as the "Prime Rate," to which most mortgage loans are tied, has an interesting backstory. The Prime Rate is technically the lowest possible rate at which money can be borrowed commercially, but in practice the Prime Rate is simply a convenient measure of the overall cost of borrowing money, both for private individuals and large corporations.
The Prime Rate is reported by the Wall Street Journal's survey of banking institutions nationwide. It is used to set credit card rates and home equity lines of credit. The Prime Rate is actually based on another measure known as the Federal Funds Rate. This is set directly by the Federal Reserve, so the Reserve has great power in determining how much money will cost. Another measure, known as the COFI for the 11th District Cost of Funds Index, is used when calculating adjustable-rate mortgages.
Another frequently-used metric is the LIBOR, or the London Inter-Bank Offering Rate. This is an international index that has an indirect effect on mortgage markets in the United States, as many banks have international holdings and interests and may base their borrowing costs on their overall performance rather than just the Federal Reserve rate or the national mortgage index.
The History of the Prime Rate
The interest rate known as the "Prime Rate," to which most mortgage loans are tied, has an interesting backstory. The Prime Rate is technically the lowest possible rate at which money can be borrowed commercially, but in practice the Prime Rate is simply a convenient measure of the overall cost of borrowing money, both for private individuals and large corporations.
The Prime Rate is reported by the Wall Street Journal's survey of banking institutions nationwide. It is used to set credit card rates and home equity lines of credit. The Prime Rate is actually based on another measure known as the Federal Funds Rate. This is set directly by the Federal Reserve, so the Reserve has great power in determining how much money will cost. Another measure, known as the COFI for the 11th District Cost of Funds Index, is used when calculating adjustable-rate mortgages.
Another frequently-used metric is the LIBOR, or the London Inter-Bank Offering Rate. This is an international index that has an indirect effect on mortgage markets in the United States, as many banks have international holdings and interests and may base their borrowing costs on their overall performance rather than just the Federal Reserve rate or the national mortgage index.
How Mortgage Rates Have Changed
Over the past fifty years, interest rates have fluctuated greatly due to various market factors. In 1965, it was not common to see interest rates below five percent for mortgages. In fact, it was not until 2010 that mortgage rates dipped below four percent.
However, mortgage rates were relatively stable until the late 1970s and early 1980s. While mortgage rates hovered around seven percent in the early 1970s, then spiked to nine percent in 1975. By 1981, interest rates had shot up to an all-time high of 19 percent. By the mid-80s they had come back down to a more normal seven to nine percent.
In 2003, mortgage interest rates fell below seven percent. By 2010, they were down to four percent, and today interest rates of less than three percent are quite common.
How Long Will This Last?
No one really knows how long it will be before interest rates rise again. What most experts believe is that they will certainly come up again at some point, and may actually skyrocket, depending on what the Federal Reserve decides to do.
The best way to protect yourself against rising interest rates is to seek a mortgage before rates go up. William Telish and his team can help you find the right mortgage for your situation. Call him for more information.
Over the past fifty years, interest rates have fluctuated greatly due to various market factors. In 1965, it was not common to see interest rates below five percent for mortgages. In fact, it was not until 2010 that mortgage rates dipped below four percent.
However, mortgage rates were relatively stable until the late 1970s and early 1980s. While mortgage rates hovered around seven percent in the early 1970s, then spiked to nine percent in 1975. By 1981, interest rates had shot up to an all-time high of 19 percent. By the mid-80s they had come back down to a more normal seven to nine percent.
In 2003, mortgage interest rates fell below seven percent. By 2010, they were down to four percent, and today interest rates of less than three percent are quite common.
How Long Will This Last?
No one really knows how long it will be before interest rates rise again. What most experts believe is that they will certainly come up again at some point, and may actually skyrocket, depending on what the Federal Reserve decides to do.
The best way to protect yourself against rising interest rates is to seek a mortgage before rates go up. William Telish and his team can help you find the right mortgage for your situation. Call him for more information.