73 Years of Interest Rates

If you’ve talked to anyone about buying a house lately, you’ve probably heard some version of this:

“I’m waiting for interest rates to come down.”

I get it.

As of August 2026, mortgage rates are hovering around 6.67%, and after spending several years hearing about 2%, 3% and 4% mortgages, 6.67% sounds terrible.

But I recently came across a chart showing mortgage rates going all the way back to the 1950s, and once you look at the entire history instead of just the last few years, something becomes pretty obvious:

Today’s mortgage rates aren’t really the strange part of the story.

The strange part was what happened before them.

We May Have Accidentally Convinced Ourselves That 3% Was Normal

Let’s go back a few years.

In 2021, the average 30-year mortgage rate shown on the chart was just 2.65%.

That’s almost free money.

Borrow $500,000 at 2.65% for 30 years and your principal and interest payment is roughly $2,015 per month.

Today, at 6.67%, that same $500,000 mortgage costs roughly $3,216 per month.

That’s about $1,200 more every month to borrow exactly the same amount of money.

So when buyers say today’s rates hurt, they’re absolutely right.

But here’s where it gets interesting.

The problem may not be that 6.67% is historically outrageous.

The problem is that 2.65% was historically outrageous.

We just happened to like that kind of outrageous a whole lot better.

Take a Trip Back to 1981

If you think 6.67% sounds painful, let me introduce you to the unfortunate homebuyer of 1981.

According to the historical chart, the average mortgage rate that year was:

16.63%.

Yes. Sixteen.

Imagine walking into a lender today and hearing:

“Congratulations, Anthony. You’ve been approved at 16.63%.”

I’d probably ask if the loan came with a complimentary defibrillator.

On a hypothetical $500,000 mortgage, the principal and interest payment would be roughly $7,000 a month.

For comparison:

2.65%: about $2,015/month
6.67%: about $3,216/month
16.63%: about $7,000/month

And 1981 wasn’t some weird Tuesday when rates briefly lost their minds.

Rates were above 10% for much of the 1980s.

In 1980 they averaged 13.74%.

1981: 16.63%.

1982: 16.04%.

1984: 13.88%.

Even in 1990, they were still around 10.13%.

So historically speaking, a mortgage rate beginning with a six isn’t particularly shocking.

But Here’s Where I Have a Problem With the Usual Realtor Argument

You’ve probably seen the social media posts:

“You think 7% is high? My parents bought their first house at 16%!”

Technically true.

Also somewhat meaningless.

Because their parents weren’t paying today’s home prices.

This is the part that often gets conveniently left out of the conversation.

A 16% mortgage on a $75,000 house and a 6.67% mortgage on a $1 million house are two entirely different animals.

Especially here in Orange County.

So I don’t think telling today’s buyers to stop complaining because somebody paid 16% in 1981 is particularly helpful.

Today’s affordability problem is not just interest rates.

It’s the combination of today’s interest rates and today’s home prices.

And that’s a much bigger issue.

The Really Fascinating Part of This Chart

Step back and look at the whole thing and you see something remarkable.

Mortgage rates started relatively low in the 1950s, climbed for decades and eventually peaked in the early 1980s.

Then they reversed direction.

For roughly 40 years, mortgage rates generally worked their way down.

10%.

9%.

8%.

7%.

6%.

5%.

4%.

3%.

Until finally, in 2021, we hit that incredible 2.65% average.

Think about that.

An entire 40-year trend basically culminated in the cheapest mortgage money most Americans had ever seen.

Then the party ended.

Fast.

In 2021, rates averaged 2.65%.

In 2022, they were 6.94%.

That’s an extraordinary change in a single year.

The housing market didn’t get a nice gradual adjustment period.

Someone basically flipped a switch.

And That Created Another Problem Nobody Talks About Enough

Suppose you bought a house a few years ago and have a 3% mortgage.

Maybe you owe $500,000.

Your principal and interest payment is roughly $2,108 per month.

Now you’re thinking about moving.

Maybe you’d like a larger house. Maybe the kids are gone and you’d like something smaller. Maybe you’d like to move closer to family.

Then you start running the numbers.

Borrow that same $500,000 today at 6.67% and the payment is approximately $3,216.

That’s about $1,108 more every month just for the privilege of borrowing the same $500,000.

About $13,300 more per year.

Suddenly the house you’re living in starts looking pretty good.

That’s the so-called mortgage rate lock-in effect, and it’s one of the reasons our housing market has behaved so strangely.

Millions of homeowners aren’t necessarily staying because they love their house.

They’re staying because they love their mortgage.

Here’s One of My Favorite Comparisons

Look at mortgage rates around the turn of the century:

1998: 6.94%

2001: 6.97%

2002: 6.54%

And today we’re around 6.67%.

In other words, mortgage rates have basically returned to where they were about 25 years ago.

There’s just one little problem.

Orange County home prices forgot to return to where they were 25 years ago.

That’s why today’s market feels so different.

The interest rate itself isn’t unprecedented.

The combination of the rate and the amount we’re borrowing is what changes the equation.

So Are Today’s Mortgage Rates High or Not?

Depends on what you’re comparing them to.

Compared with 2021?

Absolutely.

Compared with the last 70 years?

Not particularly.

And that’s probably the most important lesson hiding in all these numbers.

People tend to define “normal” based on what they’ve experienced recently.

If you bought your first house in 2020, a 3% mortgage feels normal and 7% feels insane.

If you bought your first house in 1981, 7% probably looks like somebody forgot to charge you interest.

Neither perspective tells the whole story.

History does.

One Last Thing

I wouldn’t make a major real estate decision based solely on trying to predict where mortgage rates are going next.

I’ve been selling real estate since 1997, and I’ve watched people spend a lot of time waiting for the “perfect” market.

Lower rates.

Lower prices.

More inventory.

Less competition.

The problem is that those things rarely happen at the same time.

Rates fall and more buyers jump into the market.

Prices soften and sellers stop selling.

Inventory increases and something else changes.

Real estate has a frustrating habit of refusing to arrange all the variables perfectly for us.

So rather than asking:

“Are interest rates good right now?”

I think the better question is:

“Given today’s prices, today’s rates and my particular situation, does buying or selling make sense for me right now?”

That’s a question you can actually answer.

Trying to predict exactly what mortgage rates will be six months from now?

If I could reliably do that, I’d probably be writing this from my private island.

And unfortunately, I don’t own an island.