You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Int. Rates
- Thread starter ShoeshineBoy
- Start date
Quote from NYSEscalpa:
Quote from DVB:
Shoeshineboy:
3. Have you looked at the total debt lately? The credit cards debt is at record high, so is the mortgage debt. What is scary is that the mortgage industry was really pushing for ARMs and variable âinterest-onlyâ loans for the last year or so. When interest rates go up, guess how it is going to effect the consumerâs spending, when he is in debt to the hilt?
The problem is that if the Fed starts tightening, it will not be a half a point. You will be looking at a couple of a percentage points over the term of a couple of years. They just donât stop after one rate hike.
Yes, the mortgage industry pushed for ARMs and interest only products and yes that can create problems later when rates rise. But it makes sense to do a variable rate in many cases. Alternatively, great long term fixed rates are available too and many people are in these so rising interest rates won't affect that segment of the market.
People refinance for many reasons and last year many cashed in on their equity and took advantage of the low rates. ARMS are a way to keep your payment where it is now or get it lower while taking out say $50,000 for other investments on your equity. These great rates are still available to refinance. Now a 30 yr fixed is 5.25% avg. check www.bankrate.com
After a prepay expires or before, borrowers with ARMS can then move into a fixed rate if they so desire, but the ARMs and i-only rates are for people to save money in the short term. 5,7 and 10 year ARMs have lower rates and most people aren't in one house for over 10 years these days anyways. With house prices gaining substantially in equity over the last 5 years. loan amounts are much greater now and to be affordable, they must be issued on shorter terms for the average consumer. Interest rates are not going to rise drastically in the short term. We are at 40 year lows and the economy is not running full steam- just look at today's unemployment report- all our jobs are being outsourced. It is a dangerous situation as the average debt load is so high now- a rise in rates would be devastating and cripple the progress of the economy. This is an election year and I would expect an accomodative monetary policy by the Fed and that they will not be quick to hike rates. Many things must happen and the economy must be much stonger to sustain a rise in interest rates. We will have to see how it plays out, but I expect rates to jump only slightly by years end.
Interesting you brought this up. The latest Stocks and Commodities issue has a great article showing the weakness of this "recovery" and compares this to the state of this post-bull economy with other and it does not look pretty to say the least! They talked about consumer debt, deficits, economic growth, unemployment, etc. and it's a wee bit scary to say the least.
Quote from MYDemaray:
ertrader...glad you brought up stagflation. Was wondering if anyone else thought this was a possibility.
Higher prices caused by low rates/weak dollar/rising commodities while the economy stays in the crapper....
Anyone else?
Is there any good reason to think that the dollar will turn around? I can't think of any. But I'm wondering if there's an optimistic scenario?