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By TheBasisPoint, December 3rd, 2009

Lowest Rates On Official Record Are Here Now (chart)

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Make no mistake: the lowest rates on official record are here now. The chart below shows rates from December 2009 back to April 1971, when Freddie Mac started officially tracking 30 year mortgage rates. The high was in October 1981, when then Fed chairman Paul Volcker was hiking rates to battle inflation (more on this below). At that time, borrowers paid an average of 2.3 points to buy a rate down to 18.45%. The low was November 25, 2009, when borrowers averaged 0.7 points to buy a rate down to 4.78%—note that 4.78% with 0.7 points was also achieved April 2 and April 30, 2009. These are national average rates on loans up to $417,000 for single family homes with 20% or more equity in the property. Rates change daily as mortgage bonds trade.

Rates1971to2009_tbp

In 1981, Volcker and his FOMC pushed the Fed Funds Rate to an average of 19% (compared to .25% today) in order to beat the 14.6% average inflation of the day (compared to 0.2% full and 1.7% ex-Oil&Energy now). This inflation battle caused two back-to-back recessions. The first one began in January 1980 and unemployment reached in August 1980 at 7.8%. The second one began in July 1981 and unemployment peaked at 10.8% in December 1982 (compared to 10.2% now).

 

Topics: FOMC, Fed Funds Rate, Monetary Policy, Rate History
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