I remember not so long ago making a comment about interest rates increasing above 8% and getting a couple comments saying I was being way too pessimistic.
Apparently I wasn’t being THAT pessimistic.
At this point I’d say the difference between what it takes to go from 6.5% to 8.5% on a jumbo is a lot larger than what it would take to go from 8.5% to 10%.
A $500,000 loan at 6.5% = $3143/month
A $500,000 loan at 8.5% = $3817/month
A $500,000 loan at 10.% = $4315/month.
It almost makes one wonder where the ceiling is? Could we be looking at an early 1980s credit scenario?
A $3,143/month loan payment services a $308,000 mortgage at 12%. Not counting taxes and insurance. Offset that some by the tax writeoff for the higher interest rate, but we’d still looking at a 35% haircut just because of interest rates, not counting whatever other damage to the economy would result from that type of credit contraction.
