History of the Mortgage: Ancient Rome, Medieval England, 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.

Ancient Roots

Historians trace the origins of mortgage contracts to the reign of King Artaxerxes of Persia, who ruled modern-day Iran in the fifth century B.C. The Roman Empire formalized and documented the legal process of pledging collateral for a loan.

Often using the forum and temples as their base of operations, mensarii, which is derived from the word mensa or “bank” in Latin, would set up loans and charge borrowers interest. These government-appointed public bankers required the borrower to put up collateral, whether real estate or personal property, and their agreement regarding the use of the collateral would be handled in one of three ways.

First, the Fiducia, Latin for “trust” or “confidence,” required the transfer of both ownership and possession to lenders until the debt was repaid in full. Ironically, this arrangement involved no trust at all.

Second, the Pignus, Latin for “pawn,” allowed borrowers to retain ownership while sacrificing possession and use until they repaid their debts.

Finally, the Hypotheca, Latin

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