Saturday, September 11, 2010

Mortgage Rates (1978-2008) @10%-@5%

I was just checking the Federal Housing Finance Agency's (FHFA) housing market indicator data and its crazy how mortgage interest rates in all metropolitan areas from 1978 to 2008 has dropped steadily from around 10% to 6% ( check it out here, along with a smorgasbord of other stats and spreadsheets ). Considering the recent crisis one might wonder how essential this 20 year decline in rates was for bringing so many risky borrowers into the mortgage market. Was the storm of defaults, foreclosures and bankruptcies necessitated more by this low point of interest rates or by so called subprime lending to those with the worst credit? I hope to provide a clearer picture of the role that this drop to @5% played in future posts as it was difficult to have any clear idea of  the decades old trends which led to the crisis amid the news media's shallow cacophony.