Saturday, February 16, 2013

A History of U.S. Mortgage Rates.

Reproduced with the permission of

By Troy Corman, t2 Real Estate

We've never had it so good - that is, if you're a buyer of real estate right now. If you're a saver, it's not so good.

As you can see in the orange graph in the above chart, 30-year fixed rate mortgages are at their lowest levels, basically ever. Right now, if you can get a mortgage at 3.5% on a $250,000 loan, principal and interest costs will be around $1,122 a month. Bumping the rate up to the 6.5% levels we experienced in 2006 and 2007, and the monthly costs rises to $1,580 a month. That's an extra $5,496 a year. We've been lulled into thinking that these low rates are the norm, but as we can see above, nothing could be further from the historical truth.

As mortgage rates begin to inch up, it isn't likely that they'll return to the historic low levels. U.S. banks reportedly have $1.5 trillion (with a "T") parked at the Fed. According to this article, Why Inflation In 2013 Is Imminent, the money is not being disbursed into the economy because it's more difficult for the banks to make money with the government-manufactured interest rates. 

Sooner or later, the spigots will be turned and the money will flow. In fact, it's already happening in the private investor market. Money is flowing into construction and home building. Talk to a local home builder and you'll get the real story on inflation. Material, land and labor costs are all rapidly rising. As are home prices - nationwide.

Speaking of hints of inflation, some farm land prices have doubled in the last five to ten years. During the weakest recovery in the history of the United States! And the U.S. stock market recently hit a multi-year high.

Experts agree that more inflation is imminent, but opinions vary on it's arrival date. It's most likely to occur when bond investors see the value of the dollar decline more than the interest rates they're being paid. Then, they'll no longer buy bonds unless they're offered better rates of return, or higher interest rates.

How does inflation affect you? Well for starters, you'll pay more for gas, food, clothing and shelter. It's called the hidden tax, because no socio-economic class can escape it.

To get an idea of how higher interest rates could affect your home buying plans, check out this mortgage rate chart below.

Monthly principal and interests costs on a $250,000 30-FRM at various interest rates.
3.5% - $1,122
4.5% - $1,266
5.5% - $1,419
6.5% - $1,580
7.5% - $1,748
8.5% - $1,922
9.5% - $2,102

If I can help answer any questions regarding your real estate buying or selling needs, I'd be happy to help. Reach me at 214-690-9682.

$275,000 loan at 3.6% on this home = total monthly costs of about $1,875.
View photos and details at

Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.

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