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U.S. mortgage interest rates jump to 7.16%, highest since 2001

reuters.com

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Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#211

Post by PubliusMI »

lotsofpulp wrote: post #90
test6554 wrote: post #71

Earlier quoted context omitted.

I wish there was a p2p lending program where I could make some cash and people with good credit could borrow for better rates than banks offer.

There is, just put a sign outside your door or post an ad on Craigslist/Facebook/etc. Although, I hope you have a good reason to think you are better at predicting probabilities of default than professional lenders with teams who do it day in and day out.

Many professional lenders face regulatory challenges that a small private lender might not face.

For example, a professional lender is likely to face greater scrutiny under the Civil Rights Act.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#212

Post by quonn »

seanmcdirmid wrote: post #205
quonn wrote: post #203

I find it strange that nobody here brings up the option of renting out your house instead of selling when you have to. If the mortgage is fully or even mostly covered by the rent, you can usually do that. In fact it would usually be sufficient if the interest is covered. The only exception would be divorce, unless both parties can agree.

Renting out a house is a huge pain. Local laws can make you accept tenants you wouldn't otherwise, and eviction moratoriums can make a bad tenant very difficult to get rid of. Not only that, but being a landlord isn't a labor-free job, and many of us don't have time for that, while property management companies are very expensive.

I understand that, but it seems better than loosing the house.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#213

Post by supertrope »

symlinkk wrote: post #87

I’m pretty sure I bought at the worst possible time (March). Every month that goes by, thousands of dollars of my net worth disappear because of circumstances completely out of my control. It makes me doubt the value of hard work - sure, if you slave away at your desk job you can earn maybe an extra $30k a year, but the guy down the road who just happened to buy a house at the right time earned an extra $300k over th…

The primary purpose of buying a house is to live in it. Don't look at month to month price fluctuations. The minimum holding period for a house should be 5-7 years due to transactions costs including realtor commission, mortgage origination fees, moving your stuff, and implicit costs like a zillion trips to the hardware store in the beginning.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#214

Post by fknorangesite »

mywittyname wrote: post #123
algoatecorn wrote: post #44

Earlier quoted context omitted.

Most of the people I speak to who locked in Current renters will have lower potential to save on a monthly basis, only to get 30-40% off on their first home with a >7% interest rate. If you sum the lost savings from rent plus the additional interest payment, it is uncertain whether that is the best strategy. That is also assuming real estate prices in certain regions wont hold stronger value, which they probably will…

> are not planning on selling in the next 10 years or more. Most people don't plan on selling their house when they buy it. Life usually forces you into the situation.

What makes you say that? People often consider places "starter" vs "forever" homes, for example.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#215

Post by seanmcdirmid »

quonn wrote: post #212
seanmcdirmid wrote: post #205

Earlier quoted context omitted.

Renting out a house is a huge pain. Local laws can make you accept tenants you wouldn't otherwise, and eviction moratoriums can make a bad tenant very difficult to get rid of. Not only that, but being a landlord isn't a labor-free job, and many of us don't have time for that, while property management companies are very expensive.

I understand that, but it seems better than loosing the house.

Many home owners have other options beyond losing their house.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#217

Post by gedy »

falcolas wrote: post #48
dont__panic wrote: post #28

Earlier quoted context omitted.

And dropping prices mean that someone who's been holding out over the last few years of insane price growth might finally find a home elsewhere that they can afford. As someone who was too young to climb aboard the price bubble of the last 5 years: here's hoping.

The price would have to drop dramatically (30%, the amount the last bubble dropped, would not be enough) to get a lower monthly mortgage payment.

Your downpayment goes a lot further though.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#218

Post by gizmo686 »

googlryas wrote: post #55

Financial Ignoramus here - looking back - were ultra low rates a mistake? It seems insane that this number has grown so much since even last year. Would slowly growing them over a longer period have been better than these huge jumps? It seems wrong that I refinanced a 500k mortgage last year and I would be paying ~35% less per month than someone who did the same thing today.

Its complicated. Overall, I think it is safe to say that rates were too low.

Look at this graph[0] of rates over time. When the 2008 recession happened, rates dropped to stimulate the economy. While you can find dissent on this point, overall, this is generally considered a prudent move and the conventional responce to a recession.

What happened next was that interest rates stayed near 0 until 2015, which was far too long. In 2015 the Fed started raising rates, but did so slowly.

The problem came in 2020, when the Covid recession hit. Following conventional wisdom, the Fed responded by dropping rates. However, rates were not yet high enough for this to be fully effective, and you can't go (much) below 0%. As a result, the Fed resorted to more creative measures of stimulating the economy; and economists will likely be arguing about the effect of that for years.

Having said that. This isn't particularly relevent to what is going on today. To fight inflation, the important factor is the increase of interest rates. Even if we started with high rates, they would still need to increase them to get the desired deflationary effect.

Simmilarly, the stimulating effect is more about dropping rates then having low rates.

[0] https://fred.stlouisfed.org/series/FEDFUNDS

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#219

Post by another_poster »

snarf21 wrote: post #144
ed25519FUUU wrote: post #22

There’s a ticking clock right now for 5/1 ARM. If rates stay elevated then many are going to be out of a home.

We should outlaw ARM for most people. It should only be for "accredited borrows" like we do for investing. People who don't really understand the risks get screwed and it creates unnecessary bubbles.

To play devil’s advocate, we really should ban 30 year fixed mortgages, not 5/1 ARMs. I know it sounds contradictory, but hear me out.

One of the Fed’s primary methods to control inflation is adjusting economic demand by making loans cheaper or more expensive.

In our current regime of fixed mortgages, new home buyers disproportionately bear the cost of the Fed’s effort to reduce inflation, since only they need to pay the higher costs. But if everyone had ARMs, the cost of reducing inflation would be spread out over everyone with a mortgage, so the pool of people affected would be significantly wider and the needed interest rate increases to fix inflation would be significantly lower.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#220

Post by taylodl »

b3morales wrote: post #168
taylodl wrote: post #152

Earlier quoted context omitted.

That's not what happened in 2008. This exact scenario was the primary cause of the financial meltdown at the time. The prevailing wisdom was people would always pay their mortgage, so the securitization of real estate mortgages were viewed as a safe investment - and invest they did! When the housing bubble popped a lot of investment banks who thought they had safe assets suddenly found themselves upside down, further…

This is true, but it's also missing the key part where leading up to 2008 lenders offered mortgages to people they were pretty sure wouldn't be able to keep paying, and then laundered those into the so-called "safe" investment when it was anything but. Is that part repeating now too?

I think the laundering is a bit overstated. Yes, there were "risky" loans being made but those risks were being mitigated by bundling those loans with "safe" loans into a new securities product. No one was really surprised by the risky loans going under. It was the presumably "safe" loans going under that caught everybody off-guard and created the financial storm. The entire mortgage risk model turned out to be wrong.

Your second question is interesting, I really don't know whether the securitization of mortgages is still happening today at the same level it was then. I would presume so? With a different risk model being employed to assess those mortgages, maybe?

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