I was alive in the early 80’s but I wasn’t worried about my mortgage payment. I was busy watching ET and playing little league baseball. But to hear people who are just a little bit older than I am, getting a 30 year mortgage at interest rates in the high teens in the early 1980’s wasn’t uncommon.

Assume for a moment that inflation kicks in and at some point in the future, the average rate that you see quoted on a 30 year fixed rate mortgage is 10%.

What does that do to your buying power?

If interest rates rise to 10%, your monthly Principal and Interest payment on a $200,000 mortgage will rise by $742/month.

Although I don’t remember what 10%-20% interest rates felt like, I can remember well what 7% interest rates felt like – it wasn’t that long ago! If interest rates rise to 7%, the P/I payment on a $200k loan will go up by $327 per month.

Are we going to see 10% interest rates in the foreseeable future? I don’t know, I will leave that to the experts to pontificate about. What I can say for certain though is that as interest rates rise, people are going to buy “less of a house” than they are currently buying.

And I wonder what that will do to real estate prices…