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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

#241

Post by BuckRogers »

lotsofpulp wrote: post #194
BuckRogers wrote: post #188

Earlier quoted context omitted.

You can win like a cash buyer if you pay a 2nd payment every year. If you plan on paying the minimum though, you definitely lose at 7% vs 3%. You are correct. As long as someone drops that extra payment monthly or yearly, depending on the amount and if you ensure it all applies to the principal with your lender.

> If you plan on paying the minimum though, you definitely lose at 7% vs 3%. I do not agree with this, because the lower downpayment needed for lower purchase price means more of your money can be invested. The option is not pay a low price for home and get 3% mortgage. The option is pay a high price for home (and high downpayment) and get 3%, or pay a lower price for the house, and get 7%, and I would bet you can th…

The refi is an unknown and incurs closing costs again. That's a big gamble, and if it were guaranteed to work out, everyone would get an ARM. I view those statements as a "put your money where your mouth is, get an ARM", but few do.

I agree with you if the lower downpayment is proportional to the cost difference incurred between 7 and 3%. It hasn't been so far, not even close. I've run the numbers for my own purchase and 7% over 30 years is completely insane compared to 3. I highly doubt at 7% with minimum down you can beat the interest payment by investing in the market. Even if not, there's risk that you won't gain off whichever investment is chosen. While paying off a home early (no matter the interest rate) is guaranteed to pay off financially. From both the reduced interest payments and freeing up your income sooner.

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

#242

Post by DontchaKnowit »

game_the0ry wrote: post #180

As I read the comments here, and observe discussions about housing in the media and among friends / family, I can't help but to pick up that two opposing groups start to manifest: 1. homeowners, who have total confidence in the market, willfully ignoring the influence of federal reserve policy, and everything "just work out in the long term," and 2. aspiring homeowners, who are hoping for a fall in prices, regardless…

I understand it isn't ideal that a new homeowner would have the price if their house collapse after purchasing, but if you never intend to sell, what possible harm could that do to you?

For instance- I could afford 3 of my current mortgages currently, so if I have to move but would get wreck on the price if I sold currently, all I have to do is go back to renting and rent my house out.

So what harm could this do to me?

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

#243

Post by fundad »

andsoitis wrote: post #129
bjourne wrote: post #43

Isn't there "midterm" elections coming up in two months in the US? Aren't moves like spiking the rent to induce mass unemployment likely to benefit the Republican party? It can't be a winning strategy.

> It can't be a winning strategy. The Fed is independent in the sense that monetary policy and related decisions are made autonomously and are not subject to approval by the federal government. However, its governors are appointed by the President and must be confirmed by Congress. (citation: investopedia) In parallel, when you're running the government, ideally you're running for the long-term well being of the coun…

The former president threatened the fed chair to keep rates low. This president begs for “L”s over norms that no longer exist.

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

#244

Post by fundad »

jakemoshenko wrote: post #78
epgui wrote: post #57

Earlier quoted context omitted.

The federal reserve is independent from government. This has nothing to do with any political party.

If that's true, why did the fed stop hiking rates in 2019?

Fed chair’s job was threatened and the norm was broken (for Rs).

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

#245

Post by fundad »

test6554 wrote: post #71
post_break wrote: post #62

Refinancing at 2.5% is the closest I have ever been to winning the lottery. I can't imagine trying to buy a house or finance a car right now, especially with dealers charging crazy ADMs. Something is going to have to give.

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.

Credit Union?

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

#246

Post by insanitybit »

epistasis wrote: post #170
insanitybit wrote: post #162

Earlier quoted context omitted.

I assume because it allows for what amounts to price fixing.

They would have to consist of a huge fraction of the market in order to do price fixing, but the highest percentage of purchases I have ever seen referenced is about 10% of purchases in a time period, which doesn't get anywhere close to having a significant number of the housing stock.

How huge, do you think? I imagine that in actuality 10% would be enough to move the market, especially if other players do the same.

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

#247

Post by lotsofpulp »

BuckRogers wrote: post #241
lotsofpulp wrote: post #194

Earlier quoted context omitted.

> If you plan on paying the minimum though, you definitely lose at 7% vs 3%. I do not agree with this, because the lower downpayment needed for lower purchase price means more of your money can be invested. The option is not pay a low price for home and get 3% mortgage. The option is pay a high price for home (and high downpayment) and get 3%, or pay a lower price for the house, and get 7%, and I would bet you can th…

The refi is an unknown and incurs closing costs again. That's a big gamble, and if it were guaranteed to work out, everyone would get an ARM. I view those statements as a "put your money where your mouth is, get an ARM", but few do. I agree with you if the lower downpayment is proportional to the cost difference incurred between 7 and 3%. It hasn't been so far, not even close. I've run the numbers for my own purchase…

> It hasn't been so far, not even close.

Yes, it will take a little time for the supply and demand curves to adjust. And, of course, popular/richer areas may not adjust down as much as less popular/poorer areas.

> Even if not, there's risk that you won't gain off whichever investment is chosen.

This is political, but if the US government lets its stock market indices fall/stagnate over the long term (5 to 10 years), we probably have bigger problems to worry about.

> Even if not, there's risk that you won't gain off whichever investment is chosen. While paying off a home early (no matter the interest rate) is guaranteed to pay off financially.

FDIC guaranteed savings accounts are offering 2.5% to 3% these days. I presume a higher mortgage rate means higher guaranteed savings account rates.

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

#248

Post by vinyl7 »

jasoneckert wrote: post #2

This rate is for a 30-year fixed rate mortgage, and more a reflection of the uncertainty for that period of time and not something that will necessarily influence shorter-term lending rates.

The interest rate shot up because the Fed stopped buying MBS. Banks now have to charge higher interest rates so they can make them attractive to investors compared to other investment vehicles like bonds

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

#249

Post by caeril »

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…

> people who invested in housing in the last couple years

If you "invested" in housing, you get what you deserve.

My house serves a functional purpose. It is not a status symbol, it is not a means of extracting rents from others. It shelters and operates as a home base for my family.

Real estate "investors" who lose everything in this next cycle will elicit precisely zero tears.

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

#250

Post by lelanthran »

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…

> You'll pay for any house at any rate 2-3+ times over if you just pay the minimum payments.

Maybe that's the problem - making only the minimum payments?

The people making only the minimum payment due would probably have screwed themselves in other ways, financially, even if interest remained the same.

I bought my house in Dec-2016[0]. My outstanding principle owed to the bank right now is just a hair over 17% of what the original principle was when I was granted the loan.

Whenever my circumstances improved (wage increases due to moving jobs, cash bonuses in employment, etc), the extra money each month always went into my mortgage, despite complaints from my wife that we could do with a nice holiday in some other part of the world (or that she could do with a new car[1]).

That's basically 6 years. Now perhaps there are people who did not have their income improved over 6 years, but I don't think that the majority of borrowers experienced no income improvement[2].

The real problem is that borrowers have been making the minimum monthly payments, and spending the increased income elsewhere (new iShinies, new cars, new furniture, expensive holidays ... whatever).

People underestimate just how much inroads they could make into their principle if they didn't have high monthly car payments, or "need" a 24-month cell plan that basically sells them the phone at twice the price because "Look, I get all these minutes and data for free each month".

[0] I'm not in the US, although in the country I am in, I'm in a fairly middle-class and desirable area

[1] As someone who can rebuild just about anything in an ICE car, I keep her car running just fine, even though it's a 2011 hatchback.

[2] I admit, I experienced drastic income improvement (roughly 40% increase) when I switched from being an embedded developer to a backend developer. Completing an MSc didn't hurt either.

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