Are Interest Rates High Or Low Right Now?
The answer to this question depends on the time period with which today’s rates are being compared. Where we find ourselves now is not the lowest rates have ever been, but it’s nowhere near the highest, either.
To give you an idea of where we stand in context, let’s compare the average Freddie Mac-reported 30-year interest rate for December 15, 2022, to the highest and lowest rates ever recorded. We’ll use a $250,000 loan amount.
The reported rate for a 30-year fixed-rate mortgage during the week of December 15, 2022, was 6.31%. On a $250,000 loan amount with a 30-year term, your monthly payment would be $1,549.06, not including taxes and insurance. With this interest rate, you would pay $307,662.31 in total interest if you carried the loan the full term.
The lowest rates ever got was in January 2021 when the 30-year fixed averaged 2.65% early in the month. Holding everything else constant, the monthly payment with this interest rate would be $1,007.41 and the total interest paid over the life of the loan would be $112,667.41.
We would have to go a long way to reach where rates were in October 1981 at 18.63%. Keeping the same loan amount and term, the monthly payment would be $3,896.46. You would be looking at total interest paid as a little under $1.153 million. It’s worth noting that the cost of the average home at that time, according to the Census Bureau, was only about $82,500, but still.
So while we aren’t where we were in 2020 – 2021, it could be a lot worse.
