Years of ZIRP have conditioned people into believing that rates at 5% are "high", when the historical reality is that 5% is approximately the mean rate over the past 70 years. Volcker famously broke the back of inflation in the 80s by pushing the interest rate up past 20%. https://fred.stlouisfed.org/series/FEDFUNDS
I think the reason people are so shocked is because the principal is already so high and unaffordable that any rate increase feels like a death of a thousand cuts. A rate increase from 2% to 5% when the principal is already $400k+ feels devastating in comparison to a rate of 20% but the principal being $60k
Rates are still too low. They need to be increased again.
Years of ZIRP have conditioned people into believing that rates at 5% are "high", when the historical reality is that 5% is approximately the mean rate over the past 70 years. Volcker famously broke the back of inflation in the 80s by pushing the interest rate up past 20%. https://fred.stlouisfed.org/series/FEDFUNDS
I think the reason people are so shocked is because the principal is already so high and unaffordable that any rate increase feels like a death of a thousand cuts. A rate increase from 2% to 5% when the principal is already $400k+ feels devastating in comparison to a rate of 20% but the principal being $60k
Higher rates will bring prices down.
low rates are the default of a healthy confident economy. high rates are the default for a struggling economy.