The Globe and Mail
Published Last updated
If George Orwell had written a dystopian novel about Canada’s housing market, it might have been called 1981.
That was the year mortgage rates reached levels that now seem like a plot of some oppressive force designed to terrify the population into submission. For several months, both one- and five-year fixed-rate mortgages were in the high teens and even, for a while, above 20 per cent.
The point of this heritage moment in personal finance is to provide some context for the cost of carrying a mortgage in today’s housing market. It was much worse back then if you use inflation-adjusted data. That simply means making 1981 dollars directly comparable to 2015 dollars, an easy trick using the Bank of Canada’s online inflation calculator.
No gloating about your greater suffering, baby boomers. You got hammered in the short term, but made out brilliantly in the housing market over subsequent decades. Today’s young buyers may just be looking at a short-term benefit in the form of low interest rates and longer-term obstacles posed by rising rates and the dampening effect they’ll have on prices.
Expressed in 2015 dollars, the national average price of a resale home back in 1981 was $198,094. If you took out a one-year mortgage back then at mid-year (that would have been the smart thing to do with interest rates so high), your rate would have been 19.75 per cent. With a down payment of 10 per cent, your monthly payments would have been $2,914.