1981 Interest Rates vs Today — Mortgage vs Credit Cards Explained

Hello and welcome to Dvorkin on Debt where we talk about all things money, credit cards, and everything finances.

And we have our resident expert, Howard Dvorkin. How are you doing?

I'm great. 

Sydney, take us back to 1981.

We had some good things going on. We had MTV, we had Ronald Reagan was inaugurated, but there was also some not great things happening in 1981. 

I heard there were some really bad uh mortgage rates. There were a lot of bad things and good things. 1981 was an amazing year. We had all these things happening.

All these all these things financially for consumers.

It wasn't so good. During the Carter administration, we had high interest rates. We had, you know, just before that, we had long lines at gas stations.

We didn't have a lot of innovation.

We didn't really have a very good feeling in this country. And the interest rates certainly hammered home the fact that this economy was not healthy and people couldn't afford homes because they were buying homes maybe $50,000 at the time. Maybe if you want to

That's awesome.

That's awesome. But when you're paying close to 20% interest.

That's not awesome. 

That's not awesome. Houses were cheaper back then, but the mortgage rates were astronomically high, just about as high as the interest rates on credit cards. 

But now, yeah, the houses are more expensive, but the mortgage rates are 6 to 7%. But people still feel like that's crazy. 

Well, that's because we've been spoiled the last 15 years because we've seen unbelievably cheap mortgages going on and it's just not realistic. You know, a 3 to 4% interest rate on a mortgage was not normal. And 6 to 7% 7% to 8% that's normal. We have too much unsecured debt right now. Interest rates should not be on average 24%, which is what they are right now. Interest rates need to go down and I think they will because the banks are just taking advantage of people using your credit cards wisely when the bills come in. Pay them off. Don't carry credit card interest. Whether it's 24% or maybe 10 years ago it was 16 - 17%.

That's still a lot. The good old days, it's too much. What's happening is the cost of everything is going up. When the average car costs $50,000, that's a tremendous amount of money. And let's face it, that $50,000 car is going to last maybe 10 years if you're lucky.

What did cars cost back then?

The average car prices were probably in the range of $8,000.

However, they had this company called Toyota that was pushing out cars $2 to $4,000 and they came in and you could buy a Toyota Corolla for very cheap.

Well, thank you so much for this uh nice history lesson and for next week's history lesson. No, I'm just kidding.

Oh jeez, I'm now a historian.

Thank you so much for joining us on this episode of Dvorkin on Debt and we look forward to seeing you next time. Thank you, Howard. Thank you, kid.