Save and Conquer

Yesterday, I talked about how the credit crisis will probably lead to inflation, bank failures, and increasing loan rates. That got me thinking about historic mortgage rates. I bought my first house in the early 1990s. I got a 30-year fixed rate mortgage at 8.5%. I think I paid a point to get it, too.

I found that the Freddie Mac web site had downloadable mortgage numbers from 1971 for 30-year fixed-rate, and from 1991 for 15-year fixed rate. Below is a plot of the lowest average rates and the points that lenders required. The data were tabulated every month. Note that we are still near historic lows for the current generation. The lowest 30-year was set in June 2003 at 5.23% and the lowest 15-year was in May 2003 at 4.86%. Don’t count on seeing those rates again. If you are thinking about locking in a mortgage, I would do it now. (There are some first-time buyer incentives coming soon from Congress, so if you are a first-time buyer, you might want to wait just a little while for the new congressional bill to become law.)

I would not let the fear of rising interest rates scare me into buying a house right now, however. I think housing prices will decline quite a bit more throughout this year and into the next. Unfortunately, there are many more foreclosures to come.

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