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9/11 and recession; Fed cuts 11 times
6.97%
Annual avg rate
30-yr fixed
-1.08pp
vs 2000
Year-over-year
3.89%
Fed funds rate
Annual avg
+2.83%
CPI inflation
Year-over-year
Estimated monthly rates based on annual averages and adjacent-year interpolation. Seasonal pattern reflects typical mortgage market spring/summer premium.
The Federal Reserve cut the federal funds rate eleven times in 2001 — from 6.5% to 1.75% — the most aggressive easing cycle since the early 1980s. The cuts began before 9/11 (recession started in March) and accelerated afterward.
CPI rose only 2.8% as the recession reduced demand-pull inflation. Energy prices fell after oil's 2000 peak. The concern shifted from inflation to deflation risk.
Despite recession and 9/11, housing proved remarkably resilient. Mortgage rates fell from 7.6% to below 7%, making housing affordable. Housing starts held near 1.6 million — the housing boom's foundation was forming.
$1,990/mo
At 2001 rate (6.97%)
Principal + interest only
$1,964/mo
At current rate (6.84%)
Principal + interest only
$26/mo
2001 was more expensive
vs today on same loan