What Is a Good Interest Rate on a Mortgage?
A good interest rate on your mortgage depends on when you are applying. Since rates can change year to year, it's impossible to say what would be a good mortgage rate to pay. By looking at the history of mortgage rates, paying attention to current events and learning about future trends, you can get an idea of where mortgage rates are headed and determine when might be a good time to get the best mortgage rate.
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2000s
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As of 2011, the highest rates seen this century were at the beginning. Thirty-year fixed-rate mortgages were going for 8.5 percent in 2000, before leveling off to the 5.5 and 6.5 percent range. One-year adjustable rates peaked between 2006 and 2008 at around 5.5 percent. However, the Great Recession shot all those numbers down. A 30-year fixed-rate mortgage was going for an all-time low of 4.25 percent and a one-year adjustable rate could be had for 3.5 percent. Barring another economic meltdown, it's unlikely we will see rates this low again.
The '90s
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During the 1990s, one-year adjustable rates fluctuated greatly. Rates were as high was 7.5 percent and went as low as just 4 percent. Thirty-year fixed-rate mortgages stayed in the 7 and 8 percent range, but in 1994, rates rose sharply and reached close to 9.5 percent, a number that hasn't been seen since. A 15-year fixed-rate mortgage was a little lower over the same time, though these rates are always cheaper than the 30-year option.
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The '80s
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At no time over the last 30-plus years have interest rates been higher than they were during the 1980s. In the early '80s, rates sat at 14 percent and in 1982 had reached 18 percent. These numbers cooled off by the middle of the decade, but still sat at a lofty 12 percent. Toward the end of the decade, mortgage rates dipped down to "only" 10 percent.
Influences
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To figure out where mortgage rates might be headed and if the mortgage rate your lender is providing you is good, you need to understand what influences rates. Mortgages rates will move with the economy -- if the economy is good, rates will be higher because people are likelier to be able to afford higher rates, and the opposite is true in a weakened economy. Confidence is important when setting rates. Confidence in capital markets plays an important role in increasing or lowering interest rates.
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