Ask Mike: The lowest rate ever?
Hey Guys,
I am not a financial expert. Far from it (see: investment in WorldCom). But even though I probably shouldn’t be trusted with a brokerage account, I am smart enough to realize that mortgage rates, despite their recent climb, are still pretty low. A Yahoo! Answers member emailed me and asked about the lowest rates in history. Here’s what I found out.
I did a Yahoo! search on “history of mortgage rates,” and found an interesting chart from Freddie Mac. According to the mortgage experts, the past several months have provided Americans with the lowest 30-year mortgage rates in the past 30-something years. (That data is based on national averages, so your experience may have varied.)
Even for someone who doesn’t pay much attention to these sorts of things, the chart is quite fascinating. For example, I wasn’t aware that mortgage rates were so high back in the early 1980s. A 30-year fixed mortgage averaged a staggering 18.45% in October, 1981. Suddenly anything under 6% doesn’t seem like such a bad deal.
Freddie Mac’s data only goes back to 1971, but I found a few other articles that mention mortgage rates in the 1960s and earlier. For example, this piece from The New York Times mentions that a 5.21% rate in 2004 was “the low point for 30-year mortgages since the early 1960′s.” I also found a PDF of one lender’s mortgage rates back to 1950. According to the document, this particular company’s rates were 4% on April 24, 1950. An excellent article from the Cincinnati Enquirer explains that “conventional mortgages averaged 4.61% in 1951, 4% when backed by the Veterans Administration, and 4.25% by the Federal Housing Administration.”
If all these numbers aren’t enough, Mortgage-X allows visitors to plug in dates or time frames to see average figures. It is actually pretty interesting to look at the rates and then research what was going on in the world during that time period. Odds are you can find a correlation between the two. Anyone care to hazard a guess as to why rates were so high in 1981?
So that’s the history of mortgage rates (albeit a very abridged version). Now another question: Can anyone explain what in the world a reverse mortgage is? Gold star for the best answer and the most reputable links. Please leave a comment below.
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Nice
in 1972 when we went through FHA, our highest rate was 7%, the lowest was 1%. but then again we had to re-finance in the 80s and it was 13%! talk about a shock. when we re-finance in 2002 we were lucky to get 5&7/8! next day it went up to 6. yep, things are better now for us. i very much enjoyed this ask mike.
A Reverse Mortgage is the opposite of a Mortgage.
In a Mortgage you borrow money which you pay off over time to own your home.
A Reverse Mortgage, is often used by seniors to get back some money from the equity in their home.
Either a monthly pension can be arranged, or an “account” which they can draw (money from) against the value of the home when they need cash.
An assessor comes and evaluates your home, makes sure you have proper title, and then explains the terms: Interest rate, what income you will derive, and over what lenght of time.
They usually offer you an “income” based on 75% of the value of the home.
The contract provides that the home is not sold out from under you while you are alive. But, when (you) the senior dies, the home is sold off, the Reverse Mortgage Company paid off, and the senior’s estate gets any residual funds.
Most firms are honest, but there have been a few scams. Seniors are advised to check with their bank, the BBB, and a lawyer to make sure all is up to snuff.
nice
Good article..
AS TO REVERSE MORTGAGES, that is a mortgage that does not require monthly payments by which primarily seniors can take out equity from their home for $$ now and leave it for their estates to pay back. It is basically a second mortgage where you take out $$ now and DO NOT PAY so interest continues to accrue.
Typically the amount you can take out is dependent upon the age of the homeowner and his or her estimated remaining life span so a mortgage company can estimate how much equity they need to cover the interest that will accrue. You should be able to borrow up to that amount.
I was just pre approved @3.9%
Sorry but I am not getting giddy over a 1% drop. Not to mention that you only get the record low interest rate if you have PERFECT, PERFECT credit and a secure job. Us normal people will still have to pay 5 – 7% interest. I wish they would greatly reduce the home prices by $50,000 like back in the early 90′s.
The history of mortgage rates in the US is really a quite interesting study. Prior WW2 mortgage rates probably were consistent at around 3% for those who could qualify. Fees and points were almost non-existent at that point in history. However loan to value was sometimes required about 1/2 the purchase price as down payment to qualify. After WW2 is when when saw the real boom in individual home ownership. And most rates were fixed at about 4% with little closing costs and depending on the loan program anywhere from $1 down VA backed loan to a 25% down payment on a conventional loan.
Interest rates pretty much stayed the same until the early 1960′s when we saw some of the first rates reading 5%. By the late 1960′s they had jumped up to 6.5% and into the early 70′s we say conventional rates get to the high 7% range. By the late 70′s rates literally went through the roof and by the early 1980′s we were seeing crazy rates of over 17%. Many loans back then were assumable so many people just assumed a loan from the 1960′s or early 1970′s in order to purchase a property.
A reverse mortgage is specifically for seniors over the age of 65, and can only be done if they have enough equity in their home. It is usually calculated according to their age. For example, a 65 year old senior citizen has to have at least 35% equity in their home in order to qualify for a reverse mortgage, generally speaking.
Also, the only way for someone to be able to get 3.9% is if they are doing an ARM, 3/1 ARM to be specific. Right now rates for a 30 FRM are around 5% and about 5.5% for an FHA.
You do not need perfect credit to qualify for a loan or get these great rates. As long as your credit is 620 or better, you can get into an FHA loan at around 5.5% on a 30 FRM. As long as you have had at least 2 years employment and make enough income, of course, you can qualify for any loan.
I have the most perfect credit of anyone that I have ever known.
Spotless records on everything and I got less than 1%.
I am happy and everyone asks what is my secret. I just tell them – don’t buy what you can not afford and be grateful.
Perfect life lived by me, I’m happy.
I’m happy