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A Half Century Historical Perspective On Mortgage Interest Rates

Scott W. Farley
Co-Owner/Branch Manager
Mann Mortgage, LLC
NMLS# 261382

Like most people in Hawaii I read the newspaper every day, sometimes online if I’m traveling, and specifically follow the trends with regard to our real estate values and long-term mortgage interest rates. This past week the benchmark 30year fixed-rate mortgage somehow found a way to drop even further, setting yet another record low. According to data from the National Bureau of Economic Research, it appears as though mortgage interest rates haven’t been this low since the summer months of 1956, when most longterm home loans lasted just 20 or 25 years, and Elvis Presley’s “Heartbreak Hotel” was the number one single.

Although I find it mildly interesting that economists, mortgage experts, and market pundits alike make daily predictions on where they believe mortgage rates may go in the short-term, let’s take a quick look at where we’ve come the past 55 years.

According to my research, in 1963 the national average contract mortgage rate was right around 5.875%. Of course, back then the national average purchase price was slightly more than $20,000, and the typical loan-to-value ratio was just under 70%. As one can imagine, throughout the remainder of the 60s and 70s, long-term interest rates continued their climb while the average home price nearly quadrupled reaching right around $74,000. During the early 1980s, mortgage interest rates hit their 55year peak with an average contract mortgage rate of nearly 17.625%. Another interesting statistic to note is that throughout this timeline loan-to-value ratios hovered right around 70%.

It wasn’t until the early 90s that we witnessed a major shift in home values and loanto-value ratios when the typical mortgage transaction first exceeded 80%. Although, statistically, mortgage interest rates continued a steady decline reaching today’s record low, the subprime and AltA mortgage debacle of our millennium saw loan-tovalue ratios top 95%. Only recently and after some serious regulatory pressure by the Feds, we now see that the typical national loan-tovalue ratio is just under 80%.

We have come a long way in the past 55 years or have we? Fast forward to the biggest hit of 2011 by an artist equally as risqué as Elvis was in 1956, and you’ll find that “Born This Way” by Lady Gaga topped the charts.

So whether you’re a current home owner looking to refinance, or perhaps thinking about buying a new home, your thoughts definitely should be on mortgage rates and how they apply to current property values. It’s obvious based upon the mortgage rates graph that we are experiencing unprecedented, historical lows. The good news is, if you are considering purchasing a home or refinancing your existing home in this unique marketplace, Mann Mortgage is a trusted and soughtafter mortgage banker, developing and nurturing a rewarding network of loyal customers and partners through the enthusiastic delivery of the finest services and mortgage products available today.

Aloha, Scott W. Farley

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