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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

#221

Post by quonn »

BuckRogers wrote: post #157
Test0129 wrote: post #97

Earlier quoted context omitted.

It does however make it irrelevant. If you never plan on selling and your mortgage rate is low then you're winning on inflationary terms.

I'm not sure if I'd call it irrelevant. People have to do fast home sales for many reasons, and it can come up as a necessity at any time. Life can be a twisty road that we can't foresee. I suppose I can't disagree that hoping for the best makes it irrelevant. Your second statement I wanted to agree with but you never really win with any mortgage (other than getting a home, which is important). You'll pay for any hou…

> but you never really win with any mortgage

Maybe not at 7%. Maybe not at 3,5% either. But at 1-2% fixed for 10-20 years and you don't have to refinance, you win. So your statement is a bit broad.

I think it's a good exercise to compute the total interest over the time of the credit and relate that to the cost of renting.

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

#222

Post by xnx »

lotsofpulp wrote: post #31
montzark wrote: post #14

Earlier quoted context omitted.

There is nuance that interest changes over the period of the loan. In or so 2007 some people took 5% Euribor + margin loans, but only some years after it was negative. And since negative euribor was not written to contracs some paid less interest than was margin.

In the US, 90% of loans are fixed rate for the entire term. https://twitter.com/RickPalaciosJr/status/150811381352611430...

but can be refinanced if lower rates become available

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

#223

Post by medvezhenok »

asdev wrote: post #63

people in the comments don't seem to realize if prices drop, you can buy and refinance later when rates come down. so it's really a great time to keep an eye on the market

That is true, but only under the assumption that you can qualify for a refinance when the rates come down. Last time that rates went down that much we also had a spike in unemployment and much tighter lending standards - the two seem to go hand in hand.

In fact rates going down without a [corresponding] spike in unemployment is a pandemic anomaly - which allowed so many people to refinance on favorable terms.

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

#224

Post by Sohcahtoa82 »

pchristensen wrote: post #98
Sohcahtoa82 wrote: post #74

Earlier quoted context omitted.

> you think people are going to pay mortgages they are massively underwater on? Yes? Why wouldn't you? It seems pretty short-sighted to just put your arms in the air, give up, get foreclosed on, lose your home, and have your credit be absolutely wrecked for the next 7 years. Just keep making your payments and ride it out. The market will eventually recover. I think the only reason to give up is if you fell for the sc…

I bought a house in the Chicago suburbs in August 2007 for $275k. I short sold it 4 years later for $115k. It sold 2 years ago (13 years afer I bought it) for $210k. "Eventually" is doing a lot of work in your comment.

Really, I think I'm making three incorrect assumptions:

1. People that buy a house will stay in it for 10+ years. This assumption being wrong means you're more likely to be affected by market swings.

2. Market swings won't be massively significant, for some definition of "massive", and I consider 275k -> 115k massive. Meanwhile, the Z-estimate of my house peaked at $618K this April, and is now at $561K. I would not consider that one massive.

3. That people stopping making payments because it's underwater, and not some extenuating circumstance, like losing your job and being unable to afford payments, or having a need to relocate that is unrelated to your home being underwater.

But it's #3 that really gets me. I fail to understand the "My mortgage is underwater" -> "I should stop making payments" logic jump.

I think it's because I do not see my house as investment or even an "asset". It's my HOME. I agreed to pay $338K in 2015 to have a HOME. If there was a real estate crash immediately afterwards and I was underwater, my only regret would be that I could have bought the house cheaper if I had waited a little longer. I would not in any way feel incentivized to stop making payments and walk away, because not only would that mean I would still owe the bank money, but I wouldn't have a home and my credit would be destroyed, making it hard to get another mortgage.

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

#225

Post by hypertoast »

Also, I think a housing crash - similar to early 2000s, as many people think will happen - I dont think that will happen now. Its a different situation now. Subprime mortgage was taken care off with new regulations in subsequent years.

Currently, most new buyers with fixed rates will not see anything change. Its the handful of ARM (I think its handful - unless there is some data showing otherwise) who may be the real losers.

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

#226

Post by Sohcahtoa82 »

taylodl wrote: post #152
Sohcahtoa82 wrote: post #74

Earlier quoted context omitted.

> you think people are going to pay mortgages they are massively underwater on? Yes? Why wouldn't you? It seems pretty short-sighted to just put your arms in the air, give up, get foreclosed on, lose your home, and have your credit be absolutely wrecked for the next 7 years. Just keep making your payments and ride it out. The market will eventually recover. I think the only reason to give up is if you fell for the sc…

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…

> When the housing bubble popped

Your comment misses what created the popping of the bubble. The sibling comment talking about sub-prime mortgages talks about them, and I think they're right.

I was always under the impression that the crisis began with people that couldn't pay their mortgages because banks were handing them out to people that couldn't afford them. This created downward pressure as foreclosed houses flooded the market, and irrational people decided to abandon their mortgages because they were underwater, exacerbating the problem.

> Perhaps you're too young to know this story, but this is what happened.

I'm 40, if that helps. Though in 2008, when I was 26, I was managing a Subway restaurant for $10/hr and living in a $650/month apartment (Which is now a ridiculous $1,300/month, literally double), whereas now I own a house and work in cybersecurity for an order of magnitude more.

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

#227

Post by nativespecies »

kitsunesoba wrote: post #130
ed25519FUUU wrote: post #18

We have a great house with a 2.75% mortgage. It would be hard to leave now, because a similar house would be a much higher monthly mortgage. Stuck, but thankfully we really love it and not plan on leaving.

I similarly bought about a year ago with a similar interest rate, closing just a month or two before rates started climbing. The house isn’t the most amazing thing out there, just a run of the mill mass built suburb house, but it’s such a huge upgrade over the apartments I had been living in and the payment is much lower than the rent I had been paying, and more importantly it’s mostly static (no increase to brace fo…

Same boat. Relocated last May for work, quality of life to a mid-tier city from a major hub and bought near top of local market. I miss where I was living, but my mortgage is cheaper than the rent I had been paying for the last decade in previous city. Plus - no annoying neighbors or sharing walls.

I'm locked in at 2.8% and even though I don't love my city, I am not selling (as long as I can hold off). I know a half dozen people in my similar situation here, and none plan on selling. I do plan on leaving (probably within 5 years), but I will rent my place out, not sell, if the market doesn't improve even slightly and I need/want to live. I see nothing to gain rn by selling

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

#228

Post by frumper »

fknorangesite wrote: post #214
mywittyname wrote: post #123

Earlier quoted context omitted.

> 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.

People often plan for marriages will be forever too. Life happens.

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

#229

Post by simantel »

bjornsing wrote: post #155
rossdavidh wrote: post #7

If rates go from a low of 2% up to, say, 9%, then in order to keep the mortgage payment the same, the price of a $400,000 house would have to drop to around $230,000. This assumes a 30-year fixed rate mortgage, and the details will vary depending on money down, etc. but the basic fact remains that house prices will need to fall by a lot, down to levels of 5 years ago or more, before the current interest rate hiking c…

Why only to $230,000? Wouldn’t the price have to drop to 400*(2/9)=89k to keep mortgage payments the same?

Because some of your payment goes to principal, it's not all interest.

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

#230

Post by Sohcahtoa82 »

HWR_14 wrote: post #174
Sohcahtoa82 wrote: post #74

Earlier quoted context omitted.

> you think people are going to pay mortgages they are massively underwater on? Yes? Why wouldn't you? It seems pretty short-sighted to just put your arms in the air, give up, get foreclosed on, lose your home, and have your credit be absolutely wrecked for the next 7 years. Just keep making your payments and ride it out. The market will eventually recover. I think the only reason to give up is if you fell for the sc…

> Why wouldn't you? Because it's upside down? You can buy another place and owe less on it?

No, because no matter what, I'll still owe the bank the difference between the value of the house and the mortgage balance. If I was foreclosed on, then my credit is wrecked and I wouldn't be able to get a mortgage on the new house.
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