Mortgage Rates in the 1980s

Month after month, and week after week, articles continue to focus on mortgage rates in the 1980s, to seemingly paint a picture that rates are still historically low.

And it’s pretty much always the same narrative – be happy with your 6%, 7%, and maybe 8% mortgage rate today because there was a time when it was a lot worse.

It runs parallel to the stories of having to walk to school uphill both ways, in the snow, without shoes or a jacket.

Suck it up, stop complaining. Today’s mortgage rates aren’t that high! That’s the message.

It also doubles as a sales pitch to remind you that a 7% mortgage rate isn’t bad, and could be much higher, so don’t look a gift horse in the mouth.

Why Do 1980s Mortgage Rates Matter Today?

There’s an article from CNN that talks about mortgage rates in the 1980s, complete with the “Think mortgage rates are high now?” headline.

It goes on to talk about how baby boomers dealt with interest rates as high as 19% in late 1981 when they peaked.

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

Mortgage rates then hit an all-time high in October 1981, averaging a staggering 18.45%, per Freddie Mac data.

But guess what? Earlier generations not only dealt with them, but were delighted to close with a rate at 19%. I guess it’s all relative, and 19% sounds a lot better than 20%, right?

A realtor quoted in the story adds that “our kids are shocked by 6%,” another one of those classic toughen up jabs at the younger generation.

Here’s the problem though. It’s not an apple-to-apples scenario, just like the boomers didn’t walk to school uphill, both ways.

It’s probably easy to think back to those times and remember it being a lot harder, but does the math agree? Or is it just a fuzzy memory?

Down Payments Were Higher and Home Prices Were Lower in the 1980s

Back in the early 1980s, home prices were a lot lower than today, even once inflation-adjusted.

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

Meanwhile, the median down payment was around $20,000 in 1981, despite home prices being so cheap relatively.

We’re talking a 30% down payment, give or take. At the same…

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