I don't know if you have noticed, but interest rates seem to be at or near all-time lows. The 30 yr mortgage rate is listed as 3.75% and the 15 yr as 3.125% as reported by Wells Fargo.* From 1971 through 2008, the lowest 30 yr loan rate didn't drop below 5%. It is only since 2011 that we seen the average annual mortgage rate drop below 4% and then for 5 of the 7 yrs.
The 10 yr Treasury interest rate is 2.131% and threatening to drop below 2%. Even the 30 yr Treasury is below 3% at 2.644%.**
I recall that, when I bought my first house back in 1963, I was able to assume a home loan at 5.0%, and I was so happy to get a loan less than 7%.
The Federal Funds rate dropped to near zero in March of 2009 but that was when we had a financial collapse of the Great Recession.
Below is a chart of the Federal funds rate for the last 62 years.*** Note that the amount of time the Federal Funds Rate has been below 3% over this time is very small, especially since 1963. During my adulthood, I wouldn't buy a 5 yr Treasury below 5%. In the last decade, I bought a 30 yr Treasury that paid 5%. I soon could get three years equivalent of interest in capital gains by selling the bond and did so. I figured things would certainly go back to normal in 3 yrs. Mistake, as it turned out.
The shocker is that people and companies are complaining that the current Federal Funds Rate is too high! Our president has said he wants them to lower it by a percent (but then he has variable rate loans so he would benefit financially from such a drop). I think people and companies are spoiled because of the exceptionally low rates after the great recession. For a brief period in 1981, the Federal Funds Rate got above 20%!
For a history of mortgage rates, see: https://bebusinessed.com/history/history-of-mortgages/
* https://www.wellsfargo.com/mortgage/rates/
https://www.valuepenguin.com/mortgages/historical-mortgage-rates#nogo
** https://www.cnbc.com/bonds/
*** https://www.macrotrends.net/2015/fed-funds-rate-historical-chart
No comments:
Post a Comment