Rates Have Quietly Inched Up, But They're Still The Big Story

Back in late 2010, the historically low interest rates were front-page news across the country. For the week ending November 11, Freddie Mac’s Primary Mortgage Market Survey reported an all-time average low rate of 4.17 percent on a 30-year fixed-rate mortgage.

Just a few months later, though, the buzz has faded as rates have slowly crept up. However, if you’ve been watching mortgage rates over the past several years, you’ll know that today’s rates are still extremely low, both historically and in comparison to last year.

The chart below shows how mortgage rates have moved over the years. Since 1981—when the average rate on a 30-year fixed-rate mortgage was 16.6 percent, peaking at 18.4 percent in October—we’ve definitely seen a downward trend in rates.

In looking back at the trend since the beginning of 2010, the story is a bit different. After remaining constant for the first part of the year, the rates began a long slide from April through October. Since then, rates have risen to the levels we saw in the early summer months of 2010.

So what do these trends mean for the future of interest rates? Will we set another all-time low? Most likely, no. With the economy improving and inflation on the rise, mortgage rates in the low 4.0 percent range are probably a thing of the past, at least in the short term. According to a forecast by the Mortgage Bankers Association of America, the rate on a 30-year fixed-rate mortgage will reach 5.5 percent by the end of 2011.

However, just because records may not be broken doesn’t mean that today’s interest rates aren’t affordable, especially when compared to the rates over the last two decades. With the rates low right now, you should consider locking in your rate sooner rather than later. ∆