Lately, I’ve heard a lot of people say that mortgage rates are “average” or “normal.”
As in, they are not tall or short. They are just typical.
This is usually in response to someone pointing out that they are much higher than they were just a few years ago.
In a way, it feels like a dismissal that rates are high today. And it’s usually accompanied by something like “Do you know how high the prices were when I bought my first home?!”
The problem is that it does no one any good. Who cares what they were decades ago. Or what they averaged since the 1970s?
What is the historical average 30-year mortgage rate?
While it doesn’t necessarily matter what the long-term average of the 30-year fix is, I might as well tell you.
I did the research and spent some time on spreadsheets recording historical Freddie Mac data, so it would be a waste not to share it.
Since 1972, the first full year Freddie Mac compiled data on mortgage loans through the end of 2023, the 30-year fixed period has averaged approx. 7.75%.
Technically 7.74%, but who’s counting (a single basis point)?
At last glance, the 30-year average stood at 6.78%, according to the company’s latest weekly Primary Mortgage Market Survey (PMMS).
So someone could undoubtedly tell you that the prices are not high at the moment. After all, they are about a full percentage point below their long-term average.
They could also point to the infamous 1980s mortgage rates in the double digits.
But does it matter to the prospective home buyer who is faced with all-time high prices today? Or the recent home buyer looking for relief via an interest and term refinance?
Probably not. It’s really just educational. Or a selling mechanism that makes you think the prices aren’t that bad.
I don’t like it when people say mortgage rates are average (or normal)
As I pointed out earlier, many people throw around the idea that mortgage rates are just average today. Or normally.
In other words, don’t bother. They are fine. They are good enough. They have been worse. Blah blah blah.
The problem is that this doesn’t capture recent levels as they were in the 2-3% range. It also largely ignores that rates were in the 2-4% range for most of the last decade.
While people may forget, you could get a 30-year fix at a high 2% back in 2012 and 2013.
This was not just a pandemic case. In short, super low mortgage rates existed for a long time in recent history.
Basically, since the early 2000s mortgage crisis, they have been very low.
It wasn’t until mid-2022 that fixed mortgage rates rose higher, which means it’s still a relatively recent development.
And something many potential home buyers (and existing home owners) still unite.
So tell someone: “Relax, they’re normal.” Or that they are “average” doesn’t offer much comfort.
They can just as easily respond by saying, “Well, they were 2% a few years ago and are now 7%.”
It was not only the magnitude of the change, but also the speed of the change. Interest rates on mortgages have more than doubled in less than a year.
And almost tripled in less than two years. This is unprecedented, although the rates pale in comparison to the double digits seen in the 1980s.
Just tell people the truth about mortgage interest
If you work in the mortgage industry or are a realtor, don’t tell people that mortgage rates are average or normal.
Just be honest and tell them they are much higher than they used to be. This level of transparency can work to your advantage.
You’re not trying to trick them into buying a house or taking out a mortgage. You are supposed to be their guide and their ally, someone who helps them understand the ever-changing market.
And taking that approach can make you stand out from the crowd.
I will never forget a real estate agent I met with who told me not to sell a property. She said to keep it for the long term and let it increase in value.
She deliberately missed the listing because she was being honest. If/when I sell that property, she will be at the top of my list for that reason.
The same applies to someone who needs a mortgage. Being honest can help you acquire their business in the future, even if not today.
In addition, they can refer you to family, friends, colleagues, etc. So there is absolutely no harm in calling a spade a spade here.
Give them the complete picture. Show them where rates are today, where they were a year ago, two years ago, and where they might be in 2025 and beyond.
