Nominal Interest Rates

During the mid-2000s, mortgage costs seemed relatively low only because most people don't realize that from the 1940s through 1965, U.S. mortgage rates ranged between 4.0 percent and 6.0 percent. During some periods of U.S. history, mortgage interest rates have dropped as low as 2.5 percent.

The mortgage rates of 8.0 to 14 percent that we experienced during most of the 1970s, 1980s, and early 1990s do not tell us how to judge today's rates. High nominal interest rates prevailed throughout much of the past 40 years because we also experienced (and then came to expect) high rates of inflation.

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