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By signing an ARM at an extremely low rate, two or three years ago I could have bought a quite large, expensive home on my quite modest, middle-class salary, even with the large debt load I carry. Many Americans did precisely that. Now, if I had done that I would right now be in full panic mode even though (as you correctly pointed out) mortgage interest rates are still at all-time lows.
So…
It occurs to me that the danger of the situation we are in is not so much that interest rates will skyrocket - indeed, it seems to me that even if they rise just a bit we are going to see some families defaulting soon. The issue is not the historical level of the rates as much as it is the relative rise.
I could be wrong on this - I’m not an economist, just a guy with a mortgage and some credit cards - but that’s how I see it.
Comment by LaurenceB — Friday, April 28, 2024 @ 10:53 am
You are correct–those with ARMs are likely to get into trouble. The question becomes: what percentage of mortgage holders fall in that category, and what overall effect their economic situation will have.
In terms of the fixed rates, however, that effects the ability of businesses to borrow, which strikes me as more significant.
Comment by Dr. Steven Taylor — Friday, April 28, 2024 @ 11:10 am
Speaking of inflationary pressures…
On the ABC Evening News tonight (Best Coast Edition) they spoke of price increases caused by the raising cost in manufacturing and/or transporting items. Things continue as they have, we may well see double digit inflation. Along with anti-oil speculation legislation.
Expect substantial changes in many areas of life.
Comment by Alan Kellogg — Friday, April 28, 2024 @ 10:07 pm