The start of the year showed quite a bit of promise for real estate—high prices, strong demand, steady interest rates… and then a global health crisis threw the American economy into chaos. Widespread closures, unemployment, and stay-at-home orders have led many to postpone making large purchases or sales. However, interest rates in 2020 may indicate that now is actually a good time to make a move.
Interest Rates in 2020 Are Historically Low
In an attempt to boost the economy, the Federal Reserve slashed interest rates to near zero earlier this year—which in turn brought down mortgage interest rates to historically low numbers, the likes of which haven’t been seen… ever. Here’s how interest rates in 2020 compare to other periods of American history.
Interest rates were high in the 70s and 80s
It might surprise you to learn that interest rates in the 70s and 80s were actually some of the highest rates in US history. Due to soaring inflation, rates in the 70s sat around 8.8% and climbed up to an average of 12.7% in the 80s. However, in 1981, rates reached a peak of 18%!
The 90s and 00s brought some relief
As inflation slowly decreased (in part due to interest rate increases), mortgage interest rates also declined in the 90s and 2000s. The 90s saw numbers around 8%, while early 2000s interest rates fell even further, to an average of 6.2%.
2010 rates continued to improve
The end of the 2000s saw the housing bubble burst of 2008 and the Great Recession, which caused the real estate market to slow considerably. To bolster the market and encourage buying, much like they’re doing today, the Fed lowered rates to their at-the-time historic low of 3.31% in 2012.
Rates climbed from 2012 until about 2018, where they hovered near 5%. In 2019, rates actually fell slightly, ushering many buyers back into the buying game.
2020 has the lowest rates ever recorded
Interest rates throughout history have fluctuated from astronomically high to rock-bottom low, but 2020 holds the record for the lowest ever recorded interest rate by Freddie Mac—at a mere 3.23% in the week of April 30. It beat the previous record of 3.29% from the month before.
Currently, rates sit at about 3.4%—very close to all-time lows.
Why Do Interest Rates Matter?
Interest rates determine how much you’ll pay—per month and in total—for your mortgage and your home. The difference between a 3% and a 5% or a 5% and a 10% rate can mean thousands, tens of thousands, or even hundreds of thousands of dollars throughout the duration of your loan.
For example, buying a $100,000 home in 1981 versus 2020 could mean paying $1,500 a month for your home—versus $435! That’s $1,065 savings per month, or $12,780 a year! Want to see these numbers in action for yourself? See how much difference interest rates can make with our mortgage calculator.
Are interest rates for sellers?
Should sellers monitor interest rates, too? Actually, yes—for a couple of reasons. Most obviously, if you plan to buy another home after selling your current home, you can stretch your newly acquired equity further when interest rates are low—especially if you bought your current home at a higher rate.
Secondly, when interest rates are low, buyer demand tends to increase, which is definitely good news for sellers. More buyers looking likely means more interest in your home, a faster sale, and possibly even a higher price.
Ready to Make a Move in the Triangle?
Ready to take advantage of these rock-bottom interest rates? Whether you’re buying or selling a home in Raleigh or the Triangle, Linda Craft & Team is here to help. Contact us today at 919.235.0007 to learn more about how we can put our 350+ years of combined experience to work for you.