Amusing. But not funny...

celticmoonMay 10, 2006

For way too many years my copy of Barron's Financial Tables - Real Estate Loans - has sat useless and gathering dust. Why? Because the loan tables *start* at an interest rate of 8% and go on up to 24%. Yes, 24%.

That range made perfect sense at the time of publication: 1983.

I'm old as dirt and remember the rates being 17% and up in the 1980's. Remember being thrilled to refinance to get 13.5%, and then, wow, 9%! A single digit!!

I'm posting this for young folk who may think 5% or 6% interest rates are a given. Higher rates did happen. They can happen again. Be prudent.

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quiltglo

Absolutely! Ex-DH and I paid 17.5% in 1981. In 1994, current DH and I bought points to get down to 8%. We were thrilled when the rates finally came down enough to make it worth refinacing that one.

Now I look back on that foolish first purchase. We should have rented.

Gloria

    Bookmark   May 11, 2006 at 5:11AM
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qdognj

also remember the "bad old days",lol...Our 1st home in the 80's was at a rate of 12% that adjusted every 6 months..Hit a high of 15.5% OUCH...after several years we refinanced to a fixed at 10.5%, and then again at 9%..We were ecstatic with 9%....then flash foward to several years ago, different house we got a 15 year fixed at 4 3/8 WOOHOO...unfortuneatley we are moving and now are getting a 30 year fixed at 6 1/2...oh well, not as good as 15 @ 4 3/8, but way better then 30 @9%

    Bookmark   May 11, 2006 at 8:04AM
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liz_h

We bought our first house about the same time as Gloria. The stated rate was 17.5%, but with a seller buydown (interest payment)of 5%, the buydown to decline by 1% per year. Even at the 12.5% that we were paying, it was a huge payment for us. I sometimes wonder at the risk we took. We got raises and rates came down so it worked out just fine for us. But it could so easily have gone the other way.

    Bookmark   May 11, 2006 at 6:03PM
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jannie

We started in 1981 with 18 and 1/2% VA mortgage (veteran). Our monthly payment was $660. We were told it was "good" because it was "assumable", meaning we could pass along to a new buyer of our home. That never happened. Along the way, we refinanced several times, each time paying fees and points, but each time getting a lower percentage rate and cash equity out which we used ONLY for repairs and upgrades: a remodeled kitchen, new winows and siding, a new roof, most recently bathroom remodelled. Our latest rate is/was 7 and 1/2% and a monthly payment of $1325, roughly double what we paid in 1981. The mortgage was fully paid off last September. Finally free!

    Bookmark   May 13, 2006 at 4:17PM
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gibby2015

Yup - I remember those days. We bought our first house when the going rate was 18%. We couldn't afford to buy a house on our own so we bought one with a friend and we all lived there. We assumed an 8% VA loan but had to get a second loan to cover the rest and it was 18%. It's hard to imagine that now. I think when we bought our first house on our own several years later it was around 10-12% - and we thought that was a great deal.

At least where we lived, this contributed to practically no home value apprecation. Fortunately we sold our first two homes without a realtor or we would have lost money. That's all changed now of course - the first house we paid $75,000 for now sells for about $275,000.

    Bookmark   May 13, 2006 at 7:07PM
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lowspark

I paid 17% on a car loan in 1981. WOW! And in 1983 we paid 13.5% for our first home mortgage IIRC. In fact, the rate went up between the time we put our ernest money down and the time we closed and they said we'd have to pay whatever the rate was at closing. Ouch. I sure hope it never goes to that again.

OTOH, my parents paid 4% on their mortgage in 1963. Selling price was $14.5K. Their payments in 1983 were around $153 a month, most of which was taxes & insurance. At that time we were paying $350 a month for a 2 BR apartment, and went on to pay around $1100 a month for our $80k house.

    Bookmark   May 16, 2006 at 3:01PM
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chelone

I miss the great rates on Certificates of Deposit from that era...

    Bookmark   May 16, 2006 at 5:46PM
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joyfulguy

Some of my (often senior) clients used to chortle about the great rates they got about 1981 - Canada Savings Bonds paid 18% or 19%.

They find it hard to believe me - or look upon me almost as an enemy - when I ask them how they liked to net about $2,000. on a Savings Bond with face value of $100,000.

The bond earns interest - here, taxed at top rate.

If 30% - that drops after-tax return to 14% or so.

Do they remember what the rate of inflation was then?

The gov't had huge debt, large deficit and was printing money, which made potential investors afraid for the stability of the currency ... so, unless high rates were offered, nobody bought the paper.

And most of the holders of their debt were in-country, I think.

Most didn't remember what the rate of inflation was, then.

How about 12%?

Doesn't leave much in your pocket, after the income tax people get theirs ... and the rat of inflation that nibbles off a corner of every dollar in your dollar-denominated asset, get theirs.

Speaking of huge gov't. accumulated and ongoing debt ... and a huge annual shortfall/deficit ... and that they're printing money ...

... plus a huge consumer debt, as well ...

... and you're looking at the U.S. today.

And who's the largest holder of U.S. bonds?

China.

Have a happy week, everyone.

    Bookmark   May 16, 2006 at 8:50PM
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qdognj

should have looked to see who made the post above before reading it... JOKING of course :)

    Bookmark   May 16, 2006 at 10:29PM
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joyfulguy

Is the info incorrect?

When journalists bring distasteful reports from a war zone - do you shoot the journalists?

ole joyful

P.S. Joking, of course.

o j

    Bookmark   May 16, 2006 at 11:45PM
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