What is the highest interest rate the Fed has ever had?
The fed funds rate began the decade at a target level of 14 percent in January 1980. By the time officials concluded a conference call on Dec. 5, 1980, they hiked the target range by 2 percentage points to 19-20 percent, its highest ever.
There's no federal regulation on the maximum interest rate that your issuer can charge you, though each state has its own approach to limiting interest rates.
The Fed funds rate, which is the rate banks charge each other for overnight loans, hit 20 percent in 1980, and 21 percent in June 1981. The cause was an inflationary spiral brought on by rising oil prices, government overspending and rising wages.
The Fed began to raise interest rates in an effort to ease inflation, and mortgage rates followed suit. By mid-May 2022, the average 30-year mortgage rate reached 5.3%, and rates soared past the 6% mark by the end of the year. Rates reached 7.79% in October 2023 — the highest in 20 years.
30 Year Mortgage Rate in the United States averaged 7.72 percent from 1971 until 2024, reaching an all time high of 18.63 percent in October of 1981 and a record low of 2.65 percent in January of 2021.
Interest Rate in the United States averaged 5.42 percent from 1971 until 2024, reaching an all time high of 20.00 percent in March of 1980 and a record low of 0.25 percent in December of 2008.
Interest rates reached their highest point in modern history in October 1981 when they peaked at 18.63%, according to the Freddie Mac data. Fixed mortgage rates declined from there, but they finished the decade at around 10%. The 1980s were an expensive time to borrow money.
Over time, greater control of reserve and money growth, while less than perfect, produced a desired slowing in inflation. This tighter reserve management was augmented by the introduction of credit controls in early 1980 and with the Monetary Control Act.
The Post-World War II hyperinflation of Hungary held the record for the most extreme monthly inflation rate ever – 41.9 quadrillion percent (4.19×1016%; 41,900,000,000,000,000%) for July 1946, amounting to prices doubling every 15.3 hours.
» MORE: What happens when the Fed cuts rates? The current Fed rate is 4.75% to 5.00%.
When was the last time mortgage rates were 7% or higher?
Near the end of October 2022, the 30-year mortgage rate jumped from 6.94% to 7.08%, according to Mortgage buyer Freddie Mac. Prior to that, the last time the average mortgage rate hovered around 7% was in April of 2002.
Market Expectations
However, if the Fed does cut rates more aggressively than expected, maybe mortgage rates could move lower. Broadly speaking, the market is projecting that short-term interest rates will end 2024 at close to 4% and then be in the region of 3% in December 2025.
What's the Highest Mortgage Rate in History? From 1971 to present, the highest average mortgage rate ever recorded was 18.63% in October 1981.
On a $300,000 mortgage with a 6% annual percentage rate (APR), you'd pay $2,531.57 per month on a 15-year loan and $1,798.65 on a 30-year loan, not including escrow. Escrow costs vary depending on your home's location, insurer, and other details.
The lowest average mortgage rates on record came about when the Federal Reserve lowered the federal funds rate in 2020 and 2021 in response to the pandemic. As a result, the weekly average 30-year, fixed-rate mortgage fell to 2.65%, while the average 15-year, fixed-rate mortgage sunk to 2.10%.
When a stream of income is expected to be earned indefinitely, the present value of such income is calculated using the present value perpetuity factor. So, a $100 at the end of each year forever is worth $1,000 in today's terms.
What was the highest prime rate? The highest prime rate was 21.5%, reached on December 19, 1980.
Under the criminal usury statute, the maximum interest that can be charged is 25%.
| Institution Name | APY | Compounding Method |
|---|---|---|
| Betterment | 5.50% | Monthly |
| Western Alliance Bank | 5.31% | Monthly |
| BrioDirect | 5.30% | Monthly |
| LendingClub Bank | 5.30% | Monthly |
As of August 2023, the country with the highest deposit interest rate worldwide was Argentina, where the interest rate was as high as 113 percent. Second in the list came an African country, Zimbabwe, where the interest rate reached 110 percent.
Why were interest rates so high in the 80's?
The fed funds rate has never been as high as it was in the 1980s. The main reason is because the Fed wanted to combat inflation, which soared in 1980 to its highest level on record: 14.6 percent.
- CFG Bank – 5.19% APY.
- BrioDirect – 5.15% APY.
- Western Alliance Bank – 5.11% APY.
- Bask Bank – 5.10% APY.
- Bank5Connect – 5.10% APY.
- EverBank – 5.05% APY.
- Jenius Bank – 5.05% APY.
- Valley Direct – 5.05% APY*
Under Federal Reserve Board Chair Paul Volcker, the prime lending rate was raised to above 21% to reduce inflation. Inflationary pressures eased as oil prices and union employment fell, limiting the growth of costs and wages.
Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency.
Once Paul Volcker became chairman of the Federal Reserve, the destabilizing role of activist policies on inflation expectations was recognized and less activist policies adopted, ending the inflation episode. The Great Inflation was an international phenomenon.
