Interest-ing Times

I keep hearing that mortgage interest rates are ”soaring” at 5 to 6 percent!

Whaa?!? Back in the 70s the standard mortgage interest rate was — now, take a deep breath—

Nine (9) percent!

oh, you might luck out with a tad under 9, or get stuck with a tad over, but for years it hovered round that level.

In the early 80s two things happened: adjustable rate mortgages (ARMs) were introduced, and then interest rates climbed to—sit down—

Eighteen (18) percent!

Oh and the stock market always used to go down when interest rates went up. At this period the Dow was around 770. (No thats not a typo.)

Oh and unemployment was high. Yuh, Reagan’s first term was not the rosy-fingered dawn of ”Morning in America” that conservatives now seem to think it was.

Many people who had a 9% first mortgage took out second mortgages, ARMs, before interest rates doubled. (See, back then, anything over 9% was high, rates were certain to go down!) They didnt. So now, they have to pay two mortgages, and the second mortgage payments became exorbitant, and they were losing their jobs.

If the first mortgagee were to foreclose, the second mortgage would be wiped out. So, the ARM mortgagee would make payments on the first mortgage if the homeowner couldnt, and then those payments were added to the 18% debt! it was a nightmare, especially in a divorce situation. People’s equity in their homes could be reduced to a few thousand dollars by the time they could consumate a sale.

And all this is within living memory! Proof: I’m alive, and I remember!
How come nobody else seems to? And how come they call 6% long term rates ”soaring”?