Rates Have Hit A Record High. 📈💲

Brock's newsletter | August 1, 2026

Rates Have Hit A Record High.

Mortgage rates are once again hitting their highest level this year, and it doesn't look like they are going down significantly any time soon.

Which means I'm confronted by how much non-fixed mortgage debt I actually have, including on my family home.

Fixed vs. Adjustable Debt

Fixed debt means the rate never changes. Your credit card rate isn't fixed; it floats. Car loans and most student loans, though, are fixed. Your payment stays the same for the life of the loan.

Home loans are the ultimate fixed debt. With a house as collateral, a bank will lend you $5–10 million and give you 30 years, which is probably most of your adult life, to pay it back. (Mortgage literally means "pledge until death.")

It's an even better deal in California: if you can't make payments, you can just walk away. The bank takes the house, but they can't come after you personally for any money owed. That's because we are a “non-recourse" state (note: this applies to purchase loans only, not refinance loans).

We saw this en masse in 2008–2011: people just walking away from their homes and home loans. The slang term is “jingle mail” - long ago, owners just mailed the bank their keys and said, “all yours!”

Technical term: strategic default. Bottom line: the bank takes most of the risk when you buy a home, but you get all the profit.

So Why Do Adjustable-Rate Mortgages Exist?

Lower rates. When I bought my house, I chose a 7-year ARM at 2.175% over a 30-year fixed at 4.5%. That rate comes due this December, and rates on primary residences today are in the high sixes. I locked in a 5.375% fixed rate earlier this year, so all is not lost. And I'll refinance at the first opportunity.

In hindsight, I probably should have locked in the 30-year. But I read in a finance book (I can't remember which one) that 95% of the time, homeowners are better off with a series of adjustable-rate loans rather than a 30-year loan. I can't find anything online like so maybe it's not true. Also, at the time, everyone thought 3% mortgage rates would last forever…

The danger of an adjustable rate mortgage is obvious: after 5, 7, or 10 years, the rate jumps. It's (uneuphemistically) called a "rate shock."

What is true is, although the average loan is typically paid off or refinanced in about 5–7 years as homeowners move or refinance when rates change. Plan accordingly.

Will Rates Hit 1981 Levels?

Mortgage rates peaked at 18.5% in 1981. No, I don't think we're going there (god willing). That was the Fed trying to kill hyperinflation that had been burning since 1965. They actually call it the Great Inflation.

It was a freak policy move and won't be replicated in our lifetimes.

Those rates made the real estate market crazy. Ask any Boomer/parent about mortgages back then. Sellers would often "carry paper" for part of the purchase price at a lower rate, so buyers had two mortgage payments each month, one to the bank, and one to the seller.

Houses as Inflation Hedges

Here's why I'm not scared of a decade or more of moderate-to-high inflation that goes with higher rates, which I personally think is likely.

Because I own houses, and houses go up with inflation. They are the ultimate “inflation hedge.”

And I have debt (a lot of mortgage debt, that is), which you want during inflationary times, because inflation makes your debt seem smaller. It shrinks it.

Here is Something You Never Hear

I don't care what my rates are. What matters is owning. As long as I can cover the payment (or my tenants can), give me the house.

Think about it: if you bought ten years ago, you're thrilled today. No matter what your rate was. Never wait for the perfect rate to make a good move, or to grab a great deal.

-Brock