141–150 of 223 posts
I am not buying that inflation is low. Property taxes and housing cost (especially rent) has doubled in last 10 years in New York. I think so has the medical costs. Just because gas prices are low dose not mean inflation is low
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When interest rates rise, prices fall. New buyers have a certain amount of money they're willing to pay each month and the market adjusts to that, so it makes little difference there. Existing owners would be the ones getting hit by rising interest rates, just as they were bagging outsized profits when rates were falling.
Yeah, I guess I meant that house prices would crater. Obviously some people benefit from that and some don't. My intuition is that it would also precipitate an economic downturn. Many households will see a drastic deterioration of their balance sheets, which should act as a damper on consumer spending. Which would, in theory, have 2nd order effects on the real estate market...
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Fixed rate debt may increase the value of your house if interest rates go up and your mortgage is assumable.
Almost no US mortgage products are assumable.
This Quora answer indicates that FHA loans alone alone make up a majority of new home loans in the US: https://www.quora.com/What-percentage-of-US-home-loans-are-f...
Still having trouble figuring out of being a landlord of a second home is good or bad in this environment. You owe a fixed-rate mortgage, and you're charging rent.
Rents will increase, your mortgage will not if you're locked in. The resale value of your house will be pushed down by reduced affordability, but pushed up by higher rents and cost of goods. Ultimately owning a hard asset in an inflationary period is a good idea.
I'm not familiar with a world where interest rates and inflation aren't low. What should I expect?
It's almost guaranteed we are not leaving a world of low interest rates (vs historical norms of the past 30 or 50 years). Most of the global economy is loaded up on debt: Japan, China, the US, large parts of Europe. These days it's the exception when a country has a modest debt context, whether at the government level, corporate level, or household level. Countries that we normally think of as very well off, such as…
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I recall a time of nearly 20% interest rates here in Australia a few decades ago. As far as I can remember, it was all just business as normal for most people. It all comes down to just how much debt you own. If I recall, people who were highly leveraged or had negatively geared property were hit the hardest. People with actual savings in the bank were actually happy with their interest returns being so high. Househo…
> happy with their interest returns being so high. The "returns" were rarely above the inflation rate, plus you got to pay income tax on those illusory "returns". Savvier people would shift their money into assets that kept or increased their value independent of inflation, such as equities and real estate.
I'm not familiar with a world where interest rates and inflation aren't low. What should I expect?
I recall a time of nearly 20% interest rates here in Australia a few decades ago. As far as I can remember, it was all just business as normal for most people. It all comes down to just how much debt you own. If I recall, people who were highly leveraged or had negatively geared property were hit the hardest. People with actual savings in the bank were actually happy with their interest returns being so high. Househo…
Earlier quoted context omitted.
It's almost guaranteed we are not leaving a world of low interest rates (vs historical norms of the past 30 or 50 years). Most of the global economy is loaded up on debt: Japan, China, the US, large parts of Europe. These days it's the exception when a country has a modest debt context, whether at the government level, corporate level, or household level. Countries that we normally think of as very well off, such as…
> Countries that we normally think of as very well off, such as Denmark, Sweden and the Netherlands are among the most indebted people on earth in terms of household debt to income. They can't afford much higher interest rates at all, That's a little mixed up. The effect of inflation is to reduce the effective size of debt, not increase it. So if you owe someone $500US(which has a barter value of ~100 lattes), and a…
Because in Canada people are often taking the max amount banks approve.
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No such thing as fixed rate: fixed rate just means "variable, but in 3 or 5 year (or whatever) increments". The interest is a bar graph with bars that are several years wide, instead of a graph with one-month-wide bars. Fixed rates are not free; you pay extra for the fixing. The longer the fixing, the more you pay. It only makes sense to go fixed rate if you're very sure that the interest will climb over the next ter…
> It only makes sense to go fixed rate if you're very sure that the interest will climb over the next term. That's not true. I chose to pay an extra £30 a month on my mortgage because I'm not sure rates won't rise over 5 years, and I want to be confident of budgeting for the the next 5 years. I'm confident rates won't go down, but rates going up could affect me. Think of it as insurance. I don't take home insurance b…
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It's worth noting that most Australian mortgages use variable (i.e., non-fixed) interest rates, so when rates go up, everyone's payment increases. High interest rates in the US are beneficial to mortgage holders because most people use fixed-rate loans which means as inflation increases, your monthly payment decreases in real value.
No such thing as fixed rate: fixed rate just means "variable, but in 3 or 5 year (or whatever) increments". The interest is a bar graph with bars that are several years wide, instead of a graph with one-month-wide bars. Fixed rates are not free; you pay extra for the fixing. The longer the fixing, the more you pay. It only makes sense to go fixed rate if you're very sure that the interest will climb over the next ter…
The main downside of fixed loans is that you usually can't reduce your interest payments by making additional repayments (because ultimately they are backed by long-term bonds issued by the bank).