It sort of depends on how long you intend to live in a house. For mortgages that are on 5yr terms, look at longer term averages. For example, New Zealand (ano

It sort of depends on how long you intend to live in a house. For mortgages that are on 5yr terms, look at longer term averages. For example, New Zealand (another market I'm familiar with) is currently running at 4%/yr for a 2yr mortgage and 5.5% for a 5yr. However, for budgeting purposes, most people will budget at 8%/yr, since that's the long-term average. Just to completely freak you out, during the GFC, I hit 12% annual interest. My parents hit 20% during the Canadian inflation crisis of '81. :) Go for the high end, don't be afraid of a smaller house, build up the equity and then move. However, be aware that closing costs are significant, so it's best to amortize them over several years - that's why housing calculators ask how long you will live in a house. Frankly? If you're afraid of 5%, you probably don't want to own a house, or at least, you don't want to own _that_ house.