History of the 30-year mortgage

Quick insights

• The 30-year fixed-rate mortgage has been a popular type of home loan for many years.
• The concept of the 30-year mortgage is not new—it can be traced to the 1930s.
• 30-year fixed-rate mortgage interest rates have fluctuated over time.

30-year fixed-rate mortgages are a popular choice for many people in the market for a new home. The interest rates of 30-year fixed-rate mortgage affect how many people embark on the homebuying process at any given time.

Historically speaking, favorable interest rates and home prices increase demand, but high rates tend to deter people from buying homes. Yet, there’s been a sizable range of interest rates available in American history. In this article, we’ll review the history of 30-year mortgages and their interest rates.

What is a 30-year mortgage?

A 30-year fixed-rate mortgage commonly refers to a loan for property or residence that takes 30 years to repay completely. The payment schedule usually requires one payment per month. Each payment puts some money toward the loan principal and interest charges. Over time, monthly payments lower the loan principal and more of each payment goes toward the principal than interest.

When did 30-year mortgages start?

The 30-year mortgage was introduced soon after the Federal Housing Administration (FHA) was founded. Common mortgage terms were much shorter before then. By the 1950s, Congress authorized the 30-year mortgage for both newly-constructed and existing homes.

When it was introduced, the 30-year term may have been considered a very long period. It took until the 1960s for the concept to be adopted widely and for 30-years to become a standard mortgage option. 30 years has remained the longest available term for mortgages.

How common is the 30-year mortgage?

A 30-year term is an extended period for repaying the loan, and this spread lowers monthly payments. Shorter mortgage terms tend to have higher monthly payments, but nearly everyone has a budget to manage. For a purchase as significant as a home, lower monthly payments can make homeownership accessible—probably why the 30-year term is a common choice.

How have 30-year fixed-rate mortgage rates changed over time?

Like most things in life, mortgage interest rates have had their highs and lows over time. Here’s a high-level timeline of the housing market and mortgage activity in American history.

1776 to 1928

Owning land was very important for many years during the revolutionary period. As industrialization boomed, demand for property and homes stayed relatively high. As the country emerged from World War 1, many Americans were searching for homes in and near cities. Employment opportunities there becoming increasingly more available.

1929 to 1945

This period marks a significant shift in the housing market. Unemployment rates were relatively high and some people could not manage the finances of homeownership. Construction was also paused during World War 2. Both these factors decreased demand for homes. The New Deal focused on programs and agencies that aimed to improve American infrastructure in ways that affected working Americans.

1945 to 1970

A post-war housing boom was led by soldiers returning from war who already had or wanted to start families in a suburban home. Plus, jobs in and just outside of city centers became more accessible as the country’s transportation infrastructure grew through interstate highways. During this period, suburban life likely seemed more and more within reach for many Americans.

1970 to 2000

Mortgage interest rates went up and down with notable, all-time highs occurring in the 1980s. These high rates didn’t make homebuying very appealing, but market activity and changes in lending requirements caused a general decrease in mortgage rates. This caused housing market activity to rebound until the turn of the century.

2000 to 2009

In the new millennium, lenders provided subprime mortgages to relatively riskier borrowers, causing the housing bubble to inflate. This bubble burst when variable interest rates shifted, the new monthly payments came due and could not be paid. The result was in the subprime mortgage crisis. Stock markets and unemployment took significant downturns, and millions of people lost their homes.

2010 to 2020

In the grand scheme of things, this period can be considered one of recovery. Mortgage rates generally decreased while home prices and values increased. However, even the popular choices of mortgage terms remained during the economic conditions that followed the Great Recession.

30-year mortgage rates chart over the years

Here’s a brief view of average 30-year fixed-rate mortgage rates since 1971:

• 1974: 10%.
• 1982: Above 15%.
• 1990: Just below 10%.
• 1998: Between 5% and 10%.
• 2006: Slightly above 5%.
• 2014: Slightly below 5%.
• 2022: Between 0% and 5%.
• At present: Current 30-year mortgage rates have been between 5% and 10%.

When federal interest rates increase, there’s an effect on lenders and the mortgage rates they offer. The exact effect on the housing market can vary, but interest rates affect mortgage payments. Historically, higher rates make borrowing more expensive and sometimes lower borrowing demand. Meanwhile, lower mortgage rates can increase demand.

In summary

The history of the 30-year mortgage is not nearly as long as the history of American homeownership. 30-year mortgage rates will probably continue to affect homebuying demand depending on how they fluctuate.

Despite the ups and downs of mortgage rates over the years, the 30-year fixed-rate mortgage remains a cornerstone of American homeownership. The term can make homeownership accessible for many by offering lower monthly payments than other loan options tend to offer.