Fun with interest rates

During the week when I don't have any plans for lunch it isn't uncommon to find me reading the paper in my work's library. It is a nice change of pace to be able to sit down, relax and read the WSJ, New York Times and occasionally the Star Tribune. One thing that I keep reading about is how interest rates on mortgages are declining and/or at an all-time low. This has been a common refrain when writers bring up home buying. Anyway, all of this commotion made wonder what this all meant in terms of actual dollars. I decided to do my own research using the national mortgage rates of today compared to previous years. It is pretty interesting to see how your monthly mortgage changes based on the rate. Below is the scenario I set up.

I went to Edina Reality and found a $300K home and set the inputs to have $60K down (creating a $240K loan) over 30 years with a yearly property tax of $3,671 and a yearly property insurance of $900. These inputs were based on real data from this random home I found in Minneapolis. Anyway, below is the difference based on the interest rates:

• Current Rate of 3.94% = Monthly payment of $1518.
• October 2010 Rate of 4.24% = Monthly payment of $1560
• October 2009 Rate of 4.95% = Monthly payment of $1662
• October 2008 Rate of 6.2% = Monthly payment of $1851
• October 2005 Rate of 6.07% = Monthly payment of $1831
• October 2000 Rate of 7.79% = Monthly payment of $2107
• October 1995 Rate of 7.48% = Monthly payment of $2056
• October 1990 Rate of 10.17% = Monthly payment of $2517
• October 1985 Rate of 12.14% = Monthly payment of $2875
• October 1980 Rate of 13.79% = Monthly payment of $3185

Back in October 1980 you would have to pay twice as much as per month by just changing the interest rate. What is even more shocking to me was that you would pay $333 more per month (22% more) back only 3 years ago in 2008.

Can the interest rate go lower? I looked at the data that included every month from 1971 to now and the current rate is at an all-time low. That doesn't mean it can't go lower (the trend is certainly pointing that way), but the rates are certainly a lot better than they were at pretty much any other time in the recent history.