The interest rate on my first home loan was 9.875%.  In my early 20's I bought my first condo and was happy that my loan was not over 10%, since I had no credit and little job history. 

To put it in perspective, if you borrowed $500,000 at 9.875% on a 30yr loan, your payment would be $4341/month.  At today's 4.5% rate, the payment is $2533/month. That's a difference of $1808. 

Now home prices are about double what they were 10 years ago, but the cost to own a house is only 31% higher, not 100% higher, due to the lower interest rates. 


Average 30 yr mortgage rate (Reproduced with permission

Today           = 4.25%

Oct 2000     = 7.875%.

Oct 1990     = 10.25%. 

Oct 1984    = 13.5% !!!

Let's see how that effects our monthly mortgage payments.

House price in 2000 = $300,000.  Payment at 7.875% =  $2175/month, principle and interest.

House price today   = $600,000.  Payment at 4%        =  $2864/month, principle and interest. (31% higher)

I doubt we will ever see rates like again this in our lifetime.  In 10 years, I think people who have 4% interest rates on their mortgages will be laughing all day long, as inflation kicks back in, and we go back to the historical average, which is closer to 9-10%.  I recall in 1999 when I could get a 10yr CD at my bank that paid 10%.  

The government is printing money.  Nations are racing to the bottom with their currencies.  The Fed has said they want inflation, even though it already exists when food and oil prices are included in CPI.  The Fed is creating inflation by printing and spending money buying their own debt,  under the guise of "quantitative easing." Read: "we have to pay for everything somehow."  

You may want follow suit and borrow as much money now as you can (within your budget, without over extending.)  As soon as inflation starts really ramping up, that money may seem like it's free. 

Today's rates from a local lender:

Loan Program   Interest Rate      Points       
30 Year Fixed     3.875%           2.250
30 Year Fixed     4.500%           0.000
30 Year VA         4.250%           -0.250
30 Year FHA       4.250%           -0.250