A brief history of the mortgage, from its roots in ancient Rome to the English ‘dead pledge’ and its rebirth in America
The average interest rate for a new U.S. 30-year fixed-rate mortgage topped 7% in late October 2022 for the first time in more than two decades. It’s a sharp increase from one year earlier, when lenders were charging homebuyers only 3.09% for the same kind of loan.
Several factors, including inflation rates and the general economic outlook, influence mortgage rates. A primary driver of the ongoing upward spiral is the Federal Reserve’s series of interest rate hikes intended to tame inflation. Its decision to increase the benchmark rate by 0.75 percentage points on Nov. 2, 2022, to as much as 4% will propel the cost of mortgage borrowing even higher.
Even if you have had mortgage debt for years, you might be unfamiliar with the history of these loans – a subject I cover in my mortgage financing course for undergraduate business students at Mississippi State University.
The term dates back to medieval England. But the roots of these legal contracts, in which land is pledged for a debt and will become the property of the lender if the loan is not repaid, go back thousands of years.