Short answer. The annual average 30-year fixed mortgage rate in 2000 was 8.05%, up sharply from 1999's 7.43% as the Federal Reserve tightened against the dot-com peak.
The 2000 annual average 30-year fixed mortgage rate was 8.05%, the highest reading since 1996. The Federal Reserve, under Alan Greenspan, raised the federal funds rate from 5.5% in early 1999 to a 6.5% peak in May 2000 — the tightening cycle that contributed to the dot-com correction and the 2001 recession.
The 2000 housing market
Despite rates above 8%, the U.S. existing-home market held at 5.16M sales — essentially flat with 1999's 5.21M record. Median existing-home prices reached $139,000, up 4.3% YoY. The dot-com correction beginning in March 2000 began the capital rotation from equities to real estate that would accelerate dramatically through 2003-2005.
The Fed pivot
By December 2000, with the NASDAQ down 39% from its March peak and the recession already emerging in real-time data, the Fed began signaling cuts. By the end of 2001, the federal funds rate would be at 1.75% — a 475-basis-point easing across 11 cuts in a single year. Mortgage rates would fall from 8.05% in 2000 to 6.97% in 2001 and 5.83% by 2003.
1990s context
The 8.05% rate in 2000 was actually below the 1990s decade average of about 8.1%. The decade had spanned 10.13% (1990) to 6.94% (1998), and 2000 sat right in the middle.
Sources
U.S. Census Bureau Survey of Construction; National Association of Realtors Existing Home Sales report; Freddie Mac Primary Mortgage Market Survey; National Bureau of Economic Research Business Cycle Dating Committee.