Interest Rates

[LonelyGhost]

What do you figure? Going up more? Going to level off? Time to panic and lock in the mortgage rate or keep the variable rate?

With the variable I am already at 35% of my fixed income ... locking in will put me at 37% but guaranteed for 5 years, or go for a longer term?

 

[Discombobbled]

What do you figure? Going up more? Going to level off? Time to panic and lock in the mortgage rate or keep the variable rate?

With the variable I am already at 35% of my fixed income ... locking in will put me at 37% but guaranteed for 5 years, or go for a longer term?

I'm no economist or financial expert Ghost, and our mortgage isn't up for another couple of years, but considering the way the U.S. economy is going because of various reasons, if my mortgage was up right now, I'd probably lock in for 5 years. Too much uncertainty, and Canada always follows their lead.

 

[rollerboy]

Lock in. It's a miracle that interest rates have stayed this low for this long. A small price to pay for peace of mind.

 

[Quarter Mile'r]

This is what I just got.

Just got a bank statement for the first five years on a loan that is done,
it was at 8.95% This is a ten year loan and the statement for the second
five years which is also locked in went up to 9.95%.

This is not a mortgage though just a personal loan.
So either the banks are just in the Christmas rip off mood or
they figure that rates are on the rise. They rose my lock in
rate by 1%.............greedy bloody bastards.

Hope this helps toward the guessing game.

..............QM'r

 

[threepeat]

Unless you want the piece of mind of a fixed rate, IMHO locking in your rate is kind of overrated. The banks charge you a high enough lock-in rate that they will make their money off you either way. I'm no expert, but I figure that if the main purpose of raising interest rates is to slow down the economy, they will not move too much higher because the high price of oil will provide it's own brakes on economic growth.

 

[georgebushmoron]

Lock it in.

The Canadian economy is doing very well, and with oil/gas sales spurring the economy onward, they will have to raise interest rates to prevent inflation.

The US economy is doing poorly (despite what the Bush admin is telling you) even if there have been some hopeful upward spikes. The trade deficit will continue to grow while US companies will continue to make large profits - but this is due to continuing economic restructuring of supply side forces. Perversely, raising interest rates is in the US government's best interest because it is starving for revenues from budgetary overexpeditures and fueling a war that is a black hole for cash. Raising interest rates artificially raises bond values sold to foreign countries, which has been a major source of revenues to fuel the US economy and war machine right now. Unfortunately, US citizens are gonna hurt bad from raised interest rates while more and more of them lose their jobs (due to economic restructuring). The only hope for keeping the same standard of living is to keep prices low by bringing in an influx of cheaper and cheaper imports, digging the grave deeper and deeper for Americans.

 

[rollerboy]

The spread on interest rates between short and long term is historically low. What the stagflation of the 70's demonstrated was that you can have a bad economy and high interest rates and inflation at the same time.

And certainly Latin America has shown this.

You pay a little for insurance, but insurance is cheap if a disaster does strike. And rising interest rates are not so out the question that you shouldn't be concerned.

 

[SingleInVan]

I learned the following from an old bank friend of mine:

Normally, the posted rates will vary from 1 year all the way up to 10 years, locked in that is. If you notice that for 80 percent of the time in the last 20 years or so, the 1 year closed rate is the lowest available rate at any given time. If you were to renew your mortgage, year after year at the 1 year posted rate, your interest rate will pretty much go with the flow. You won't be locked in at a high rate if the rates go down and vice versa.

Also, if you were lucky enough to save enough during the year, you would be able to put a lump sum payment of any amount you want without any penalties at the renewal period.

I believe that this is the best way to go.

 

[rollerboy]

In the last 10 years, the 1yr mtg rate was as high as 10%. Even within the past 5 or so years it's been over 8%. If you can't tolerate those kinds of rates, due to your fixed income, then you should lock in at 6%.

 

[bonanzabob]

int rates

The money markets seem to be pricing in a stop to USFED interest rate hikes in the first quarter of 06. That would lead me to believe that interest rates will level and maybe soften a little towards the end of 06.

My opinion --- stay with a variable rate.

 

[Ais]

This would be my advice. Variable rates vs fixed rates is all about risk tolerance. This is of course a personal decision. It is essentially the same as hedging. Don't base the decision on making or saving money. It is about at what rate are you comfortable removing the risk. If at x% you are at x% of you income and you are comfortable with it. Then fix it and forget about it.

However I believe that if you continually do 1 year fixed or variable mortgages over time, you would end up with a lower rate for the long term. ie greater than 10 years.

 

[CEG]

One thing you have to remember is that when you try to qualify for a variable rate, the lender will actually have to qualify you at a higher rate, so the percentage income will be actually greater.

This allows the bank some breathing room.

 

[mustangjoe]

What do you figure? Going up more? Going to level off? Time to panic and lock in the mortgage rate or keep the variable rate?

With the variable I am already at 35% of my fixed income ... locking in will put me at 37% but guaranteed for 5 years, or go for a longer term?

My advice is to sell your trailer and move back into your moms basement. No more interest to worry about plus you got lotsa money to blow on hookers.

 

[LonelyGhost]

My advice is to sell your trailer and move back into your moms basement. No more interest to worry about plus you got lotsa money to blow on hookers.

I'm already shacked up with Hitrack's mom and he's living in the basement!

 

[LonelyGhost]

Thank you for all the info ...

lots to think about but the bottom line does seem to be my tolerance for 'risk' and whether to lock or ride.

I appreciate all the thoughful and considerate responses, and Merry Christmas to all of you!

 

[mustangjoe]

.

I appreciate all the thoughful and considerate responses

you're welcome.