Sunday, September 30, 2012

This Will End Soon

The average interest rate on a 15-year fixed-rate mortgage in the U.S. dipped to 2.73 percent last week. Given Fed money printing and the massive debt, this downhill run is just about over.

All borrowers should lock in current rates for as long as possible. With regard to mortgages, if you can get an assumable loan, you will look like a financial genius in less than five years.

6 comments:

  1. I read about this alot- Locking in interest rates. But govts in general have been known to change the rules when things go terrible bad with interest rates/bond markets. Who is to say that they wont re write the rules like has been done many times in other countries? I just dont think its a sure thing locking in interest rates and assuming your going to win out by paying back in depreciated dollars.

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    1. The housing bubble slogan, "It's a no brainer" comes to mind.

      And of course there's, on the other hand:

      http://www.jamesaltucher.com/2011/05/why-i-would-rather-shoot-myself-in-the-head-than-own-a-home/

      Lots of arguments pro and con on that thread.

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  2. How much could they rewrite them publicly though? There is already mass anti-govt sentiment, I doubt they could do it without backlash. Americans care about being #1, that would threaten way to many people. Bob's post is correct, dollar is going down, mortgage while you can.

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  3. How will the federal government finance itself with the rising debt on continued trillion dollar deficits? Rates are not going up anytime soon.

    The Fed will maintain low rates and will be the buyer of last resort if necessary.

    Sorry Robert, but you have been calling this since early 2010. Not going to happen.

    Craig

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    Replies
    1. Didn't you read at all Wenzel's post on why the Fed doesn't completely control interest rates?

      http://www.economicpolicyjournal.com/2012/09/does-fed-really-control-interest-rates.html

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    2. It was my comment that started the post.

      Did you read the exchange I had with Wenzel?

      My arguement is that the Fed must keep rates low or the deficits/debt become impossible to fund. With todays rates the cost of servicing the existing debt is $350 billion per year. With Wenzel's comment he beieves that rates will first move to around 7% or so. This would push the debt service to over 1 Trillion annually.

      With open ended QE the rates, according to Wenzel, will continue to have upward pressure. This means higher debt cost. How can the debt service be covered? It can't.

      The Fed will keep rates low and monetize the debt,

      Craig

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