Keith Gumbinger
Keith Gumbinger
borrow change consumers couple fed might raises rates
There's no way for consumers to borrow more cheaply. But that might change if the Fed raises rates a couple more times.
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Mortgage rates come down when fixed-income investors think the economy is slowing, not because the Fed cuts rates.
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What is new today is that lenders are allowing for the layering of risks on top of one another. What we don't know is what if we put all these risks together and put them in a rising interest rate environment, a declining housing market, or a weakening economy.
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With rates as low as they are people can cut years off the mortgage for the same monthly payment.
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Welcome to the cold reality. A lot of people selected short-term interest rate product and are now beginning to see how these things benefit the lender.
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The question you need to ask yourself is, why would a bank be pitching you this product at this time? The obvious answer is that bankers believe rates will rise in the future. Getting you out of a fixed loan and into a variable one helps ensure profitability on your account.
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This would free up cash now, while still minimizing their exposure to rising rates during the period they expect to remain in the house.
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Someone who will be out of their home within five years to seven years can save some money with an ARM. But you have to be aware of the reality that interest rates are likely to be somewhat to significantly higher in three years, five years, 10 years down the road from today.
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If the Fed's cuts succeed in stimulating the economy, then mortgage rates are actually likely to rise,
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Not only do you not own any of your home, but you may be piling up additional debts that could quickly exceed the value of the home. There are no guarantees that rates will remain at comfortable levels and no guarantee that home prices will continue to go up.
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If you pay points up front, it's harder to get your money back. When rates are high, borrowers have to pay points to trim rates any way they can, but with rates so low there is really no need to pay those points.
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If you've refinanced in the last 18 months or two years, this movie's a rerun. Rates aren't at compellingly low levels.
borrowers budget buy encouraged invest loans money paid people product save stretch value
These loans can be of value for people who want to save or invest the money they would have paid in principal, ... Unfortunately, the way the product has been pitched, borrowers have been encouraged to stretch their budget to buy more house.
Could there be some 50s? There could be some 50s.