Heterogeneous time preference has a profound impact on the wealth distribution and therefore on equilibrium asset prices. I identify two distinct effects on interest rates: an averaging effect due to Jensen’s inequality and a general equilibrium consumption timing effect. The averaging effect decreases and the timing effect increases real interest rates, and both effects induce an inverse term structure. More fundamentally, the model shows that asset prices need to be interpreted with caution. Evidence apparently pointing to non-standard preferences may simply be the result of heterogeneity.