When Interest Rates turn the corner

[Luvtoride]

Interesting article in the WSJ. I’m sure many of us remember this time in our younger days. I was buying my house and wondering how I was ever going to afford a 17% mortgage. Luckily, the seller who was moving to Florida took back the mortgage at a bargain 13% rate for this “nice young couple”.

https://www.wsj.com/articles/when-i...t=yvg1uc34gqzbu55&reflink=article_email_share

It’s true, the past is very clear but the future is very shrouded in fog.

 

[rwdflynavy]

I'll laugh since I have a 30 year mortgage at 2.25% and no other debt.

 

[Time2]

We bought our first house in 1984 when 30 years rates were 16-3/4% we opted for a 13-3/4% three year balloon mortgage.

 

[VanWinkle]

Bought my first house in 1978 at 6% interest. It seemed like a lot at the time, but proved to be a bargain over the next 10 years.

 

[Luvtoride]

I'll laugh since I have a 30 year mortgage at 2.25% and no other debt.

So my guess is that you will NOT be paying off your mortgage early to live mortgage free! I would agree with that!

 

[Dtail]

Bought a Co-Op in 1983 with a 12.25% mortgage. No decision making with extra monies whether to pay down the mortgage or invest in the market.

 

[Chuckanut]

I'll laugh since I have a 30 year mortgage at 2.25% and no other debt.

That's a great rate!

Some of us back in that time of high interest rates also bought 10 year T-Bills at rates in the low to mid teens. (IIRC, 12-16% in the early 80's)

I cried when my last one matured.

 

[Markola]

I’m guessing those high rates in those days kept downward pressure on demand and prices? Or not? (The article is behind a paywall. What are the main points?)

 

[Sunset]

My first mortgage was at 14% a deal only because it came from my DM.
She did insist on true mortgage and told me she would foreclose on me if I skipped paying her

 

[oldphd]

Early 80s I got my first house at around 13.5%, IIRC.

I remember reading an article in either a print magazine like Newsweek/Time or the WSJ... gist of it was we would NEVER see rates below 10% again!

 

[Luvtoride]

I’m guessing those high rates in those days kept downward pressure on demand and prices? Or not? (The article is behind a paywall. What are the main points?)

Mark, I will try to paste the pdf of the article in a future post here soon.

 

[MichaelB]

Mark, I will try to paste the pdf of the article in a future post here soon.

Sorry, we can’t do that, as it would violate copyright regs. You can find more detail in Gumby’s FAQ here https://www.early-retirement.org/forums/f32/copyright-the-dmca-and-cut-and-paste-62748.html

A snippet from the article is fine, or just a short summary in your own words.

 

[stepford]

We bought our first house in 1984 when 30 years rates were 16-3/4% we opted for a 13-3/4% three year balloon mortgage.

Ah, balloon mortgages. When I bought my first (and only) crappy little starter home I opted for a "30 due in 5" balloon note. In 5 years I refi'd into a 30 due in 7 and then 6 years later finally refi'd into a 30 year fixed (which I ended up paying off in about 13 years).

This choice of balloon notes was a mistake born of my financial conservatism (even starting at age 30). Friends and colleagues of mine were going for adjustable mortgages, but I didn't want to take the risk of rates bouncing back up. Instead, as we all now know, rates steadily marched downward for 20+ years and adjustable mortgages ended up being the smarter call.

This wasn't the first or last time I lost money by worrying about the future rather than betting on it.

 

[Teacher Terry]

Bought our first house in 1980 with a 12% interest rate.

 

[Jerry1]

I’m not sure what our first mortgage was, but it must have been 12% or more. I remember that our first refinance was down to 10%. Not sure if it was that refinance or the next one, but we also went from 30 years to 15 years and kept the payment pretty close.

When I saw the title of this thread, I was hoping for some insight or strategies for when the interest rates turn the corner and starts going up. Not looking forward to all that goes along with it, but I wouldn’t mind having some safe money that pays a good interest rate again.

 

[Koolau]

We got to assume a 10% VA loan in 1983. We felt like we'd hit the jackpot!