Who cares what the mortgage rates were in the 1980s?

Month after month, and week after week as articles continue to focus on mortgage rates in the 1980s, it appears that rates are still historically low.

And it’s almost always the same narrative – be happy with your 6%, 7%, and maybe 8% mortgage rate Today because there was a time when it was very bad.

This runs parallel to the stories of going uphill both ways, in the snow, to school without shoes or a jacket.

Suck it, stop complaining. Today’s mortgage rates are not that high! That’s the message.

It also doubles as a sales pitch to remind you that a 7% mortgage rate Not bad, and can be a lot more, so don’t look a gift horse in the mouth.

Why do 1980s mortgage rates matter today?

there is one Article From CNN who talks about mortgage rates in the 1980s, “Think mortgage rates are higher now?” title.

It talks about how baby boomers pushed interest rates up to 19% in late 1981, when they peaked.

The 30-year average was around 9% in early 1978, before climbing to 10% later that year, 13% in 1979, and near 15% in 1980.

According to Freddie Mac data, mortgage rates reached an all-time high in October 1981, averaging a staggering 18.45%.

but guess what? earlier generations not only dealt with them, but were also Happy To close with a rate of 19%. I guess it’s all relative, and 19% sounds a lot better than 20%, doesn’t it?

A realtor quoted in the story says that “our kids are shocked by the 6%,” one of those classic puzzling over the younger generation.

However here lies the problem. It’s not an apples-to-apples scenario, just like boomers didn’t go to school both ways up the hill.

Maybe it’s easier to think about that time and remember it’s harder, but does the math agree? Or is it just a hazy memory?

Down payments were high and home prices were low in the 1980s

In the early 1980s, home prices were much lower than they are today, even after being inflation-adjusted.

While numbers vary by source, let’s say that in 1981 the typical home was going for around $65,000. In today’s dollars, this is approximately $212,000.

Meanwhile, the average down payment was around $20,000 in 1981Despite house prices being relatively affordable.

We’re talking a 30% down payment, give or take. At the same time, a quarter of home buyers surveyed said they could afford a down payment of $40,000 or more.

Long story short, smaller loan amounts were even less loan-to-value ratio (LTVs) in the 1980s.

Today, the average down payment is $27,500 per Attom Data Solutions For homes purchased with the financing during Q3 2021.

This represents just an eight percent down payment based on the nationwide average selling price.

Without getting too complicated here, today’s home buyer has a lot of debt remaining, and thus a high mortgage rate has a lot to do with it.

If your loan amount is $45,000, an 18.5% mortgage rate isn’t that bad. This is approximately $697 per month.

Now let’s consider a house selling today for $400,000. You put down 10% and get a 7% rate, resulting in monthly principal and interest payments of approximately $2,395.

we will ignore private mortgage insurance Required for LTV over 80%. This would be about 40% of today’s income (dti ratio) Paying off that mortgage every month (principal and interest only).

To set a $45,000 loan in 1981 at 18.5% would require only a 37% average income for that time period.

Using an Inflation Calculator from US Bureau of Labor Statistics$697 in October 1981 would be approximately $2,215 today.

So despite that sky-high 18.5% mortgage rate, today’s home buyer is in a tough spot with a 7% rate, even without factoring in the mandated PMI.

You can’t look at mortgage rates in a vacuum

1981 mortgage 2022 mortgage
purchase price $65,000 $400,000
advanced payment $20,000 (31%) $40,000 (10%)
loan amount $45,000 $360,000
mortgage rate 18.5% 7%
Monthly payment $697 $2,395
household income $22,390 $72,000
inflation-adjusted pay $2,215
mortgage-to-income ratio 37% 40%

Simply put you just can’t see two mortgage rate from different decades and conclude that one is better or worse than the other.

Sure, mortgage rates of around 19% sound incredibly bad, and certainly a lot higher than today’s rates of around 7%.

But home prices, household income and inflation must also be considered. Without those details, it’s really just an incredible walk-through of the story going both ways.

It’s also worth considering the astonishing percentage increase in mortgage rates recently.

back in 1981, they Only Basically doubled from the beginning of 1978 to its peak in late 1981.

Beginning in 2022, the 30-year certainty has jumped from about 3% today to 7%, a 133% increase.

And that’s through about 10 months, much shorter than the nearly four years it took for rates to double in the late 1970s and early 1980s.

So let’s stop talking about mortgage rates in the 1980s.

(Photo: pascal terzen,

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