How High Are Interest Rates?

Interest rates today have many people talking, especially those who remember the ultra-low rates of the last decade. With rates now notably higher, there’s a sense that they’ll inevitably come down again. However, a closer look at the long-term trends reveals that today’s rates aren’t as extraordinary as they might seem. In fact, history shows that rates can remain elevated for extended periods, even if recent years have trained us to expect otherwise.

A Historical Lens on “High” Rates
Looking back over several decades, the current rates actually sit within a normal range. In the late 1970s and early 1980s, rates hit all-time highs, with mortgage rates exceeding 18% as the Federal Reserve tackled high inflation. While today’s rates may feel high compared to recent years, they remain well below those historical peaks.

Over time, as inflation settled in the 1990s and early 2000s, rates gradually moderated. Then, following the 2008 financial crisis, and again following the Covid-19 pandemic, the Federal Reserve cut rates to near zero to stimulate economic recovery. Many people became accustomed to borrowing at these historically low levels, and the past decade or so began to feel like the norm.

Do Rates “Have” to Fall?
It’s understandable why today’s rates might feel elevated; they are substantially higher than what we’ve grown used to over the last ten to fifteen years. But economic conditions and interest rates have historically been cyclical. The low-rate environment following 2008 and 2020 were exceptions, not a rule. There’s no reason rates can’t remain at or around current levels for an extended period—especially if inflation and other economic conditions remain in play.

Adjusting Expectations
Today’s rates reflect a shift from a unique period of extremely low borrowing costs back to a more balanced, long-term average. While the past decade has set certain expectations, the bigger picture suggests that rates don’t “have” to move back down just because they’ve gone up. In fact, rates could stay at this level—or even go higher—depending on economic trends.

Understanding interest rates from this broader perspective can help us manage our expectations and make informed financial decisions. Instead of expecting a quick return to low rates, it might be wise to view interest rates in a broader historical context.