7% is still considered low by historic data.
this post was submitted on 18 Aug 2023
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7% on $416,000 (national average) is still more money than 16% on $47,200 in 1980....
Adjusted for inflation comparing interest paid for 30 year fixed:
Loan Amount: $185,457 @ 16% - Interest Paid: $720,306 and Total Cost: $905,763
Loan Amount: $416,000 @ 7% - Interest Paid: $580,923 and Total Cost: $996,923
That's closer than I thought actually.
I understand your math but I think the better view would be "what are the monthly payments at each point in time (no inflation) and how many of hours of work per month based on the median income of the time?".
Based on that the 1980 house would have a payment of $731/month. Median income was $21,020, which is about $10.11/hour. So it would take about 72 work hours a month to pay for a home.
The current rates yield a monthly payment of $3,107. Median income is $56,940, which is about $27.37/hour. So now it would take 113.5 hours a month to pay for a home, an increase of almost 57%.
To make it even worse, there are usually only 160 work hours a month, so that means you have to work 71% of a month just to pay for an "average" house and mortgage. I'm not even factoring in taxes or any other expenses.
Rates shouldn't have been so low in the first place. Home loans have basically been free money for the wealthy to acquire houses as assets in a sick fucking get-rich-quick scheme, where the consequences have been no one being able to afford homes. Now all we need is a tax on unoccupied homes.
I am so glad we have a fixed-rate mortgage, but I don't know how we're ever going to be able to afford to move out of this town.
Holy jumpin fuckin jahosafat.
cries in 1980s mortgage
nice. well, bad for some parts of the economy, but good for other parts