What if interest rates go to 13%?

[La Jolla Renter]

Interest rate to home value relationship:

650k purchase price
150k down
500k 30yr fixed at 7%
=$3,326 payment.

475k purchase price
150k down
325k 30 yr fixed at 12%
=$3,342 payment.

A 5% increase in interest rates knocks a homes value down another 27%.

[underdose]

[quote=peterb]RB- looks like the TED spread is confirming your thesis. Our govt only has as much power over this as their lenders will allow. So, it’s really their call. The Chinese have indicated that the party is pretty much over from this time on.[/quote]

RunningBear and peterb, I totally agree that our government does not control the world wide markets. They may think they do, and they may act according to that belief, but those actions will continue to have the dreaded unintented consequences. They do largely control the US mortgage market now. Even if they try to manipulate long term treasury yields by printing like mad to buy treasuries and it fails, accellerating the dumping of our debt by foreign creditors, they can still offer mortgages at 5% no matter what the yields on treasuries are. They’ll just socialize the losses on the mortgages, and print the money to make up the difference. This would be hyperinflationary, though. All I was trying to say is that it seems like all bets are off with interest rates on various debt instruments, at least in the short term. These clowns are doing whatever they can to manipulate things, and houses could creep up in nominal terms if inflation is severe enough no matter what happens to interest rates.

[underdose]

[quote=peterb]RB- looks like the TED spread is confirming your thesis. Our govt only has as much power over this as their lenders will allow. So, it’s really their call. The Chinese have indicated that the party is pretty much over from this time on.[/quote]

RunningBear and peterb, I totally agree that our government does not control the world wide markets. They may think they do, and they may act according to that belief, but those actions will continue to have the dreaded unintented consequences. They do largely control the US mortgage market now. Even if they try to manipulate long term treasury yields by printing like mad to buy treasuries and it fails, accellerating the dumping of our debt by foreign creditors, they can still offer mortgages at 5% no matter what the yields on treasuries are. They’ll just socialize the losses on the mortgages, and print the money to make up the difference. This would be hyperinflationary, though. All I was trying to say is that it seems like all bets are off with interest rates on various debt instruments, at least in the short term. These clowns are doing whatever they can to manipulate things, and houses could creep up in nominal terms if inflation is severe enough no matter what happens to interest rates.

[underdose]

[quote=peterb]RB- looks like the TED spread is confirming your thesis. Our govt only has as much power over this as their lenders will allow. So, it’s really their call. The Chinese have indicated that the party is pretty much over from this time on.[/quote]

RunningBear and peterb, I totally agree that our government does not control the world wide markets. They may think they do, and they may act according to that belief, but those actions will continue to have the dreaded unintented consequences. They do largely control the US mortgage market now. Even if they try to manipulate long term treasury yields by printing like mad to buy treasuries and it fails, accellerating the dumping of our debt by foreign creditors, they can still offer mortgages at 5% no matter what the yields on treasuries are. They’ll just socialize the losses on the mortgages, and print the money to make up the difference. This would be hyperinflationary, though. All I was trying to say is that it seems like all bets are off with interest rates on various debt instruments, at least in the short term. These clowns are doing whatever they can to manipulate things, and houses could creep up in nominal terms if inflation is severe enough no matter what happens to interest rates.

[underdose]

[quote=peterb]RB- looks like the TED spread is confirming your thesis. Our govt only has as much power over this as their lenders will allow. So, it’s really their call. The Chinese have indicated that the party is pretty much over from this time on.[/quote]

RunningBear and peterb, I totally agree that our government does not control the world wide markets. They may think they do, and they may act according to that belief, but those actions will continue to have the dreaded unintented consequences. They do largely control the US mortgage market now. Even if they try to manipulate long term treasury yields by printing like mad to buy treasuries and it fails, accellerating the dumping of our debt by foreign creditors, they can still offer mortgages at 5% no matter what the yields on treasuries are. They’ll just socialize the losses on the mortgages, and print the money to make up the difference. This would be hyperinflationary, though. All I was trying to say is that it seems like all bets are off with interest rates on various debt instruments, at least in the short term. These clowns are doing whatever they can to manipulate things, and houses could creep up in nominal terms if inflation is severe enough no matter what happens to interest rates.

[underdose]

[quote=peterb]RB- looks like the TED spread is confirming your thesis. Our govt only has as much power over this as their lenders will allow. So, it’s really their call. The Chinese have indicated that the party is pretty much over from this time on.[/quote]

RunningBear and peterb, I totally agree that our government does not control the world wide markets. They may think they do, and they may act according to that belief, but those actions will continue to have the dreaded unintented consequences. They do largely control the US mortgage market now. Even if they try to manipulate long term treasury yields by printing like mad to buy treasuries and it fails, accellerating the dumping of our debt by foreign creditors, they can still offer mortgages at 5% no matter what the yields on treasuries are. They’ll just socialize the losses on the mortgages, and print the money to make up the difference. This would be hyperinflationary, though. All I was trying to say is that it seems like all bets are off with interest rates on various debt instruments, at least in the short term. These clowns are doing whatever they can to manipulate things, and houses could creep up in nominal terms if inflation is severe enough no matter what happens to interest rates.

[equalizer]

Here are nice graphs on rates (note that recent graphs are 2 weeks behind):

http://mortgage-x.com/trends.htm

1981 rates peaked and 1984 rates started falling.

HSH has the almanac of monthly data:

http://www.hsh.com/mtghst.html

[equalizer]

Here are nice graphs on rates (note that recent graphs are 2 weeks behind):

http://mortgage-x.com/trends.htm

1981 rates peaked and 1984 rates started falling.

HSH has the almanac of monthly data:

http://www.hsh.com/mtghst.html

[equalizer]

Here are nice graphs on rates (note that recent graphs are 2 weeks behind):

http://mortgage-x.com/trends.htm

1981 rates peaked and 1984 rates started falling.

HSH has the almanac of monthly data:

http://www.hsh.com/mtghst.html

[equalizer]

Here are nice graphs on rates (note that recent graphs are 2 weeks behind):

http://mortgage-x.com/trends.htm

1981 rates peaked and 1984 rates started falling.

HSH has the almanac of monthly data:

http://www.hsh.com/mtghst.html

[equalizer]

Here are nice graphs on rates (note that recent graphs are 2 weeks behind):

http://mortgage-x.com/trends.htm

1981 rates peaked and 1984 rates started falling.

HSH has the almanac of monthly data:

http://www.hsh.com/mtghst.html

[BKinLA]

[quote=svelte]…remember the phrase “stagflation” and WIN (“Whip Inflation Now”) buttons?[/quote]

Remember wearing your WIN button upside-down:
(NIM = “No Instant Miracles”)?

My family bought a house in 1980 by assuming the mortgage from the seller. Whatever the interest rate was on the existing mortgage, it was obviously lower than a new one at prevailing rates.

If rates do spike, I wonder if this might become commonplace again…although who wants to assume a toxic mortgage on a property that is declining in value?

[BKinLA]

[quote=svelte]…remember the phrase “stagflation” and WIN (“Whip Inflation Now”) buttons?[/quote]

Remember wearing your WIN button upside-down:
(NIM = “No Instant Miracles”)?

My family bought a house in 1980 by assuming the mortgage from the seller. Whatever the interest rate was on the existing mortgage, it was obviously lower than a new one at prevailing rates.

If rates do spike, I wonder if this might become commonplace again…although who wants to assume a toxic mortgage on a property that is declining in value?

[BKinLA]

[quote=svelte]…remember the phrase “stagflation” and WIN (“Whip Inflation Now”) buttons?[/quote]

Remember wearing your WIN button upside-down:
(NIM = “No Instant Miracles”)?

My family bought a house in 1980 by assuming the mortgage from the seller. Whatever the interest rate was on the existing mortgage, it was obviously lower than a new one at prevailing rates.

If rates do spike, I wonder if this might become commonplace again…although who wants to assume a toxic mortgage on a property that is declining in value?

[BKinLA]

[quote=svelte]…remember the phrase “stagflation” and WIN (“Whip Inflation Now”) buttons?[/quote]

Remember wearing your WIN button upside-down:
(NIM = “No Instant Miracles”)?

My family bought a house in 1980 by assuming the mortgage from the seller. Whatever the interest rate was on the existing mortgage, it was obviously lower than a new one at prevailing rates.

If rates do spike, I wonder if this might become commonplace again…although who wants to assume a toxic mortgage on a property that is declining in value?

[Author]

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