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Mortgage Interest Rates - History and Trends Home Mortgage Rates

Elisabeth Myrick

Over the past decade, mortgage interest rates have fluctuated greatly as our economy has changed and different elements affected consumer spending. Even more recently, in the past five years, we have seen home mortgage loan rates change drastically, although they are beginning to even out, along with the price of homes after the housing boom.

In 2003, home mortgage rates were very similar to current mortgage rates, with 15 and 30-year fixed rate mortgage rates coming in around six percent. Adjustable rate mortgage interest rates were nearly the same, with a 5/1 ARM at six percent while a one year ARM came in slightly lower with a rate a little lower than five percent.

During 2003, home mortgage rates fluctuated, dropping to close to five percent in the middle of the year and spiking near 6.5 percent in the fall. Rates began tapering back down during the end of the year and continued dropping through early 2004.

In early 2004, the mortgage interest rate for a 15-year mortgage and 5/1 ARM was just below five percent, while a 30-year mortgage was just under six percent. By mid-year, rates for a 30-year mortgage had risen to well above 6.5 percent and 15-year and ARM mortgages hovered around six percent. Rates dropped slightly to end the year and interest rates for each mortgage type were within a few points of one another to close out 2004.

The spike in mid-2004 was the last large spike we have seen, as rates have steadily risen since the beginning of 2005, although mortgage interest rates fell slightly towards the middle of 2005, but slowly continued to rise, ending the year with 30-year rates slightly above six percent and a 5/1 ARM slightly higher.

In 2006, rates continued to rise through the first half of the year and then tapered off, ending the year almost exactly as it began. Now, in 2007, 30-year mortgage interest rates began the year closer to 6.5 percent and then spiked in the summer, a complete opposite of most years. Now, as the Federal Reseve System (the Fed) has begun lowering interest rates to help the economy, rates have steadily dropped since mid-year, to their current mortgage rates near or just below six percent.

The best mortgage rates were in mid-2003, at the beginning of the housing boom. The difference between these rates and current rates equals nearly $1,000 a month for the average mortgage payment.

Refinance mortgage rates during this time mirrored the national average. For homebuyers who bought any time in the last year, refinancing now may give them the best refinance rate in years. Refinancing can help many homeowners save thousands of dollars over the life of their loan. If refinance rates continue to drop, many homebuyers who bought in the last six months may consider refinancing their mortgage as well.

Mortgage rates over the past five years have fluctuated drastically; however, they look very similar today to what they were in the beginning of 2003. Rates seem to fall mid-year, probably due to the number of consumers who buy homes during the summer, and then steadily rise to end the year.

When beginning to think about shopping for a home mortgage, or to refinance your home, it is important to begin watching the mortgage interest rate trends. This will give you a good clue as to the best time to lock in to an interest rate. More time is definitely better when planning to either buy or refinance, but just a little research can save you a great deal when buying or refinancing your home.

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