Short answer. The Volcker-era peak in U.S. mortgage rates was 16.63% annual average (1981) and 18.45% weekly high (October 9, 1981).
Paul Volcker took the Federal Reserve chair in August 1979 with a mandate to break double-digit inflation. By the time mortgage rates peaked in 1981, the federal funds rate had been pushed to 19% and the prime rate to 21.5%.
Mortgage rates, 1979–1985
- 1979: 11.20%
- 1980: 13.74%
- 1981: 16.63% — peak
- 1982: 16.04%
- 1983: 13.24%
- 1984: 13.88%
- 1985: 12.43%
The cost in housing
The Volcker mortgage shock effectively shut down the U.S. housing market. New-home sales fell from 817K in 1978 to 412K in 1982 (-50%). Existing-home sales fell from 3.99M to 1.99M (-50%). The 1981–82 recession was housing-led; unemployment reached 10.8%.
Did it work? Yes. CPI inflation fell from 13.5% (1980) to 3.2% (1983), and the long-run path of mortgage rates inflected — by 1998 they would be back below 7%, and they would stay there through 2021.
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.