Some longtime homeowners like to muse about the good old days of the 1950s and 1960s, when mortgage interest rates were 5 percent or 6 percent, nearly everybody got the standard long-term, fixed-rate loan and the homeowning was easy.
Since that period, adjustable-rate mortgages have emerged as an alternative to fixed-rate loans and -- in the long period of inflation and high interest rates in the '70s and early '80s -- usually the only choice.
But there has been a steady drop in mortgage interest rates over the last six years.
It has not quite brought back the good old days, but it has helped forge a comeback for the plain vanilla fixed-rate, long-term loan.
Mortgage interest rates have stayed below 10 percent for close to a year now, and the national average for a 30-year fixed rate in mid-December was 9.66 percent, down from 9.8 percent a year ago and 10.7 the year before that.
The market may be responding. Sales of existing homes jumped 3 percent in November, to 3.14 million units, after two months of declining sales rates in September and October, the National Association of Realtors announced.
The group attributed the rise in sales rate to lower mortgage interest rates and declining consumer worries about the gulf crisis.
Mortgage economists usually discount prevailing interest rates by the rate of inflation, which represents dollars that will not, in a sense, be paid back. They call the resulting number the "real" interest rate, and here, too, the news is positive.
For example, the average fixed 30-year mortgage rate in 1984 was 13.76 percent and inflation was 3.9 percent, so the "real" mortgage rate was 9.86 percent.
For someone taking out a fixed-rate mortgage today at 9.7 percent, the 11-month inflation rate of 6.4 percent produces a real interest cost of 3.3 percent, representing a huge drop in actual cost to consumers since 1984.
For most borrowers, the lower rates seem to argue in favor of fixed-rate, as opposed to adjustable-rate, mortgages.
Adjustable-rate mortgages are essentially bets -- gambling images crop up regularly in experts' discussions of mortgage choices -- that interest rates are going to go down, and many buyers evidently do not believe rates can drop much more.
So there has been a steady slide in the proportion of new mortgages that are adjustable, from more than 40 percent two years ago to 23 percent today.
