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30-Year Fixed Mortgage Interest Rates Could Hit 6.5% To 7% By 2020

Home and condominium buyers who sit on the fence and wait another two years could have to pay a 6.5% to 7% mortgage interest rate by 2020.

Experts base that gloomy forecast on the Federal Reserve Board’s sweeping new plan to raise interest rates two more times in 2018, three times in 2019 and once in 2020, ultimately pushing its benchmark federal-funds rate to a range of 3.25% and 3.5%.

On June 14th, the Fed raised its federal-funds rate a quarter of 1 percentage point for the second time this year to a range of 1.75% to 2%. It was the seventh rate hike since 2015, and it followed an increase in March this year.

“We are still in the middle innings of rising interest rates,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR). “Consumers should expect another three or four rounds of interest-rate increases over the next 18 months.” As a result, Yun said “mortgage rates will consequently continue to nudge higher.”

On June 14th, Freddie Mac’s national Primary Mortgage Market Survey reported that benchmark 30-year fixed mortgages averaged 4.62%, up from 4.54% a week earlier. A year ago at this time, the 30-year fixed loan average was 3.91%.

Chicago-area lenders were charging 4.376% to 4.486% last week on 30-year fixed loans, according to

“The 30-year fixed-rate mortgage average climbed 8 basis points to 4.62 percent following the Fed’s 25 basis-point rate increase,” said Sam Khater, Freddie Mac’s chief economist. “The good news is that the impact on consumer budgets will be smaller than past rate-hike cycles,” Khater predicted. “That is because a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements. The adjustable rate mortgage (ARM) share of outstanding loans is a lot smaller now—8% versus 31%—than during the Fed’s last round of tightening between 2004 and 2006.”

On June 14th, Freddie Mac reported that rates on 15-year fixed mortgages averaged 4.07%, up from last week when it averaged 4.01%. A year ago at this time, 15-year fixed loans averaged 3.18%.

With the economy now nine years into an expansion, experts say the Fed’s move reflects the steadiness of growth, the job market’s strength and inflation that is finally reaching the Fed’s 2% target level.

“Inflation continues to firm and borrowing costs are inching higher,” Khater observed. Although wages are slowly growing, stronger gains would certainly go a long way in helping consumers offset these increases in prices and rates.”

However, some economists worry that the Fed’s aggressive tightening of monetary conditions could spark a sharp slowdown in growth next year. That could force the Fed into reversing course and begin cutting interest rates in 2020.

Recently, former Federal Reserve Chairman Ben Bernanke predicted the next recession could be less than two years away. According to Zillow’s Home Price Expectations Survey, nearly half of the 100 real estate experts and economists surveyed said they expected the next recession to begin sometime in 2020. Mortgage-Rate History

Mortgage rates hit a historical rock bottom on November 21, 2012, when the 30-year fixed mortgage average hit 3.31%, Freddie Mac reported. More than 18 years ago—in August of 1999—when many of today’s Millennial borrowers were in grammar school, lenders were quoting 8.15% on a 30-year fixed mortgage.

However, to really appreciate today’s low interest rates, housing experts say home buyers need only to look at what banks and mortgage lenders where charging more than three decades ago in the early 1980s.

According to Freddie Mac, benchmark 30-year mortgage rates peaked at a whopping 18.45% in October of 1981 during the Great Recession of the 1980s. Rates fell below 10% in April of 1986, and then bounced in the 9%-to-10% range during the balance of the 1980s.

Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates were relatively affordable five decades ago at 5.81% to 5.94% between 1963 and 1965.

In 1966 and 1967, borrowers paid an average of 6.3% to 6.4% In the 1960s, rates last dipped below 6.5% in January of 1968, when the national average hit 6.41%. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6%-to-9% range.

For more housing news, visit Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit

“The book is Escaping Condo Jail by Sara Benson and Don DeBat. I would say that anybody thinking about buying a condo, or even anybody serving on a condo board, or anybody who has any connection to a condo, this is must reading—all 600 and something pages. Thanks a lot for a great book!”


Steve Sanders, “Your Money Matters” WGN TV, December 22, 2014

By Don DeBat

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