A little perspective on interest rates: (not a wonky post)

[Atticus]

In 1981, home interest rates were at an all-time high at over---sit down if you need to---18%. We had been "lucky" enough to get a mortgage in the late '70s at a few points below that.

When we borrowed for the home we now live in, interest was "down" to 10.32%.

My point in posting about my personal experience with mortgage rates is simply this: it has been much worse in the past and---we survived.

I understand that "things are different" today, but "things were different" for me than they were for my parents in the '50s. We will find a way to get through this.

"This, too, shall pass".

[Scrivener7]

1. When I bought my first home, I got a "great rate!" of 7 point something percent.

Whistled all the way home.

That was 1990 during that housing crash.

My dad talked about getting a 3% mortgage in the 50s. I couldn't get my head around that number at the time.

[KPN]

2. What's really different today is wages. Most

people I knew were making well above minimum wage in the 70s. The interest rate on our first home was 11.5% in 1981. Even with that, my monthly mortgage payment was between 20-25% of my monthly income at the time — and I was in an entry level job.

So, things are different. Even with the 2.5-3% mortgage rates, many young people were stretching to 35% or more of their monthly incomes to get into a house. That’s a significant difference.

[LakeArenal]

3. On 1980 my first mortgage was 14%.

I was happy to even qualify. But I worked at a bank and got a perk.

[Qutzupalotl]

4. Also, keeping interest rates artificially low

since about late 2003 allowed housing prices to bubble. People could afford a more expensive house. Now, not so much. We'll see whether prices fall soon; I'm seeing slight drops, but hoses around me still seem grossly overvalued.

[czarjak]

5. The crazy though!

[UpInArms]

6. Thank you, Atticus

Actually, the interest rate should normalize around 5-6% … this provides a stable platform, one where the banks can charge a not-exorbitant rate (see your post) and savers can have passive income.

The zero rates only benefit banks, they still charge much higher rates than zero, savers are punished and housing prices inflate.

With a normal interest rate (5-7%), mortgages and the price of a single family residential dwelling tend to average the same cost per month as a lower interest rate (2 - 3%) … but with a slowing of the inflated value of the dwelling, so housing costs remain somewhat static.

The sound of the squealing about higher interest rates is mostly from financial institutions that can no longer get away with gouging.

Those self same banks all have credit card branches that charge consumers from 18-29% interest.

[SlimJimmy]

7. The interest rate on my first home was 18.5% and gas lines were

odd days, even days. Yes, it was much worse for a lot of reasons. But this feels different some how, and not for the good. But you are correct, this too shall pass.

[leftyladyfrommo]

10. And speed limit was lowered to 55.

And Jimmy Carter wore a cardigan and did fireside chats. We all turned our thermosats down that winter.

[karynnj]

8. I actually got a 16. 5 percent rate for a 3 yr balloon loan at that point

The man at the bank spent considerable time explaining that it would be better for me, as a single woman, to take the 17 percent 30 year rate. After politely declining a few times as he persisted, I told him my degrees were in math and economics, I had a very solid job, and it would be crazy to take a 30 year loan at the historically high rate offered.

When the balloon loan ended, I was offered a 7 or 8 percent mortgage with a 15 year term. About 3 years or so after that, when I sold, the value of the condo had nearly doubled. I think this was because prices rose as rates went down as demand rose.

[Maeve]

9. My first house was at 18.5%

However, the house cost less than $50,000, too. In the 1960's, my parents had a 20 yr mortgage that cost them @$100 a month. (Slightly less than what Dad made a week)

We're in a rough patch, yeah. But as you said, we'll get thru this.

[leftyladyfrommo]

11. My house in 1980 was 13.5% but the going rate was18.

My mortgage was $20,000 so my payment wasn't bad.