When Mortgages Went Sky High: The 18.63% Peak of October 1981

In October 1981, mortgage rates in the US hit a jaw- dropping 18.63%. It was a time when hopes collided with reality, leaving countless Americans standing in the rubble of shattered dreams. It wasn't just a number for those looking to buy a home. It was a barrier. A locked door. A sign that said, “Not now. Maybe not ever.”

Imagine the moment. You've saved for years, skipping vacations and cutting corners on every little expense. You did everything right. And now, you’re sitting before a mortgage officer, clutching your dream like it's the last thing you own. The pamphlet they hand you feels heavier than it should.

18.63%.

Your heart sinks. You knew rates were high, but this? This feels impossible. The home you’ve been dreaming of—each room pictured in your mind, every detail planned out—begins to slip away. It feels like a cruel joke, like a door slammed in your face just when you thought you were about to step through.

Imagine you're Terence, a steelworker. You've spent years saving for a house, looking to give your family something stable, something they could call their own. But now? Now, the numbers don’t add up. How does a man provide when the cost of simply borrowing money is enough to break him?

Or imagine you're Keesha, starting out in your career. You're young, ambitious, ready to take on the world. And part of that dream? Owning a home. But with 18.63%, your plans are crushed. The excitement of buying your first house turns into dread. You calculate and recalculate, hoping the numbers might change. They don’t. What was once possible now seems distant, maybe forever out of reach.

This wasn’t just a financial inconvenience. It was heartache. It was watching the life you imagined crumble before your eyes. People just like Terence and Keesha faced the same devastating realization: no matter how much they had saved, no matter how prepared they were, they couldn’t touch what they had worked so hard for. And it hurt.

At the core of this crisis was hyperinflation, a monster growing out of the gutters for years, gnawing away at the value of hard-earned money. The Federal Reserve, led by Paul Volcker, decided to go to war with it. And, like any war, there were casualties. Volcker raised interest rates to unprecedented levels, and the ripple effect was felt in every bank, every living room, and every conversation about buying a home.

For those hoping to buy, it wasn’t just the rising cost, but the feeling of being left behind. Of watching others, perhaps luckier or more established, sail past, while they remained anchored to anguish. Waiting. Hoping for a break that might never come.

And the waiting lasted.

It wasn’t until 1986, with interest rates beginning to dip into the 10% range, that the US economy and housing market began to stabilize. Many people in the US started to feel a sense of optimism about the future once again. However, by then, many others had already adjusted their dreams. Some had given up altogether. The impact of those high rates was more than financial; it was emotional. It was the kind of heartbreak that lingers, a reminder of how close they had come, only to have their hopes dashed by forces beyond their control.

Today, when we think about mortgage rates, it's easy to overlook that time and treat it like a blip in history. But for many who lived through it, who felt the weight of 18.63% interest bearing down on their shoulders, it was anything but a blip. It was the painful reality that dreams sometimes have a price too high to pay.