Maybe better (or worse) than you think.
If you’re someone who (like me) struggles a little with weight, you have probably noticed the same thing.
Mine will rise to a certain point where it starts bothering the way I feel, and I start thinking I need to do something about it.
Which invariably I put off until it’s even higher.
Then I finally start. And when I get back down to the point where I originally said it was intolerable, it feels great.
And I lose my willpower pretty quick after that.
Same weight, totally different feeling. The only thing that changed was the direction.
I got a marketing email from a mortgage broker this week basically saying people should get over higher interest rates because they’re really not that bad.
And on a technical basis, he made a pretty good point.
His argument was that rates today are below the long-term historical average and also lower in absolute terms than they were during some periods in the past.
Of course, to make that comparison you’re going back far enough that a large chunk of today’s adults were either too young to remember those rates or weren’t buying houses yet.
But still, he’s making the same point I made above from the opposite direction.
Rates seem high because they were lower in the recent past. If we had arrived at today’s rates by coming down from something much higher, people would probably feel very differently about them.
Same number. Different direction. Great analysis as far as it goes. But it leaves out the price of the house, which is at least as important.
When mortgage rates were in the 6–7% range roughly 20 years ago, home prices were much lower. Since then, home prices have risen substantially.
So telling someone that 6% or 7% isn’t historically unusual doesn’t necessarily tell you whether buying a house at today’s price and today’s rate is affordable.
Most people aren’t buying an interest rate. They’re buying a house with a monthly payment.
It’s not that the rate doesn’t matter. Of course it does. But you can’t really talk about the rate without talking about the price it’s being applied to.
Yes, it depends on how you look at it. But it helps to look at the whole picture.
P.S. How you look at things can make a big difference in how you feel about them.
A few years ago Scott Adams, the Dilbert guy, wrote a book called Reframe Your Brain that has dozens of simple reframes. It’s an easy read, and while they won’t all apply to you, it’s almost certain some will help.
P.P.S. As an Amazon Associate I earn from qualifying purchases.
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