I just refinanced my 30-year fixed mortgage for 2.5%. The rate is utterly ridiculous now. If we get even a modicum of inflation over the next few years, I will be paying negative real interest rates.
Come to Canada. You can get 1.49%.
The Fed now owns nearly 1/3 of all U.S. mortgages
51–60 of 346 posts
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#52Earlier quoted context omitted.
I was paying 0.6% for the last years ( Euribor mortage ). Some people in North West Europe actually had negative rates already.
What was the term? Was it a floating rate after a lock-in period? The thing that makes 2.5% so incredible in the US, is that it's the rate for a 30 year fixed mortgage. Get one of those loan today and you'd still be paying 2.5% interest in 2049.
Not sure what lock-in period means. This was a variable/monthly rate. So it could go even lower.
Current 30 year rates in the EU are comparable to the US ones, maybe even lower.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#53I keep thinking of all the huge amount of asset purchases by the Fed, especially legally dubious purchases like corporate bonds, that "this won't end well". That said, I don't really know what "not ending well" would look like. Would it just be total runaway inflation? Can anyone more knowledgeable comment on what possible endgames are for these asset purchases?
Banks lending to people who cannot pay, and then selling the bonds to the fed. This becomes a handout both to banks, and anyone with lending access. In the real economy it means that people will start -EV (negative expected value) projects. Because heads you win, and tails you default.
That works for bank executives, not shareholders or individuals.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#54I would be curious to see analysis for what home prices would be with 0 Fed intervention. Also, I don't understand how millennials aren't supposed to see this figure and immediately feel a sense of rejection, that the housing market is some form of a pyramid scheme, where you had to get in early to have a chance.
I would be curious to see analysis for what home prices would be with 0 Fed intervention.
It is an interesting thought experiment. From what I've gathered, any intervention by the government to make housing more accessible, just gets priced in pretty quickly, removing the benefit.
For example, FHA offering 5% down payments instead of a standard 20%, just means every first time buyer can now pay 15% more (approximately) for a house. In hot markets, the prices rise quickly to reflect that and everyone is in the same position as before.
It obviously benefits buyers in non-hot markets. It's pretty nice to put $7500 down in the mid-west for a house.
I assume that without any federal intervention, the housing prices would be as accessible as they are today, prices would just be lower so that that the same number of people could afford 20% down and 5-year term mortgages with the resulting interest rate risk.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#55Earlier quoted context omitted.
What was the term? Was it a floating rate after a lock-in period? The thing that makes 2.5% so incredible in the US, is that it's the rate for a 30 year fixed mortgage. Get one of those loan today and you'd still be paying 2.5% interest in 2049.
Not sure what lock-in period means. This was a variable/monthly rate. So it could go even lower. Current 30 year rates in the EU are comparable to the US ones, maybe even lower.
By lock in he is asking if the rate can change. In the USA, the rate is permanent.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#56Earlier quoted context omitted.
The worst case scenario is the rest of the world dumping US treasuries, and causing interest rates to skyrocket and USD to plummet.
Countries are buying US gov't debt because: 1) they have a lot of USD due to exporting goods to the US and 2) it's one of the safest places you can park money. Sure, it would be bad if they dumped treasuries (at a big loss), but why would they do that if they put the money there in the first place because it was safe?
They will dump them because they will need the liquidity.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#57The headline isn’t correct.
There is $17T in US mortgage debt. The Fed has backed $2T of that via mortgage backed securities, up from $1T pre-Covid-19.
That’s ~11% not 1/3.
The article itself mentions this, but decided to use a misleading headline instead.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#58I would be curious to see analysis for what home prices would be with 0 Fed intervention. Also, I don't understand how millennials aren't supposed to see this figure and immediately feel a sense of rejection, that the housing market is some form of a pyramid scheme, where you had to get in early to have a chance.
I would be curious to see analysis for what home prices would be with 0 Fed intervention. It is an interesting thought experiment. From what I've gathered, any intervention by the government to make housing more accessible, just gets priced in pretty quickly, removing the benefit. For example, FHA offering 5% down payments instead of a standard 20%, just means every first time buyer can now pay 15% more (approximatel…
> For example, FHA offering 5% down payments instead of a standard 20%, just means every first time buyer can now pay 15% more (approximately) for a house.
Assuming they had the same deposit available they would theoretically be able to pay 300% more. Of course they probably wouldn't be able to demonstrate their ability to service a loan that large.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#59I would be curious to see analysis for what home prices would be with 0 Fed intervention. Also, I don't understand how millennials aren't supposed to see this figure and immediately feel a sense of rejection, that the housing market is some form of a pyramid scheme, where you had to get in early to have a chance.
The pyramid scheme isn’t a new thing, sadly. The chart for median home prices shows it starting at least as far back as 1997. Maybe as far back as 1976.
Re: The Fed now owns nearly 1/3 of all U.S. mortgages
#60Earlier quoted context omitted.
The worst case scenario is the rest of the world dumping US treasuries, and causing interest rates to skyrocket and USD to plummet.
The ECB has 2x the portfolio size as a share of GDP as what the Fed does. The Bank of Japan's portfolio is about 4x the Fed on that metric. Why isn't the Eurozone collapsing, with interest rates skyrocketing and the Euro imploding? Somehow Japan is still managing - despite a public debt & budget situation several times worse than the US - with a GDP per capita still on par with Britain, France, and just below Germany…
Because the US is the biggest debtor in the history of humanity and is supporting (in a symbiotic relationship) all those countries you listed who are also at risk of collapsing.