Nowhere To Go But Up?


In the late 1970?s interest rates were high, really high, about 17% or higher.
At the time I wasn?t old enough for it to really affect me, rather I was just old enough for it to scare me into thinking that my generation would be the first generation that could never buy a home, car or whatever. But it didn?t happen. All that catastrophic thinking added up to nothing. Isn?t that usually the way it goes?

Times changed and for the past 30 years Americans have enjoyed exceptionally low interest rates and even some times of loose lending standards. However, that bubble seems to have popped. Perhaps those loose lending standards were too loose there for a while. But no speculating on economics or politics or whatever, I?m sure we all have our opinions of how and why and whatever.

Now it seems that the recession is over. Yes, I know we still need jobs to come back. Yes, I know the real estate markets across the country are still plummeting. Yes, I know that there are millions of foreclosures and delinquencies in all the credit markets. But economists and the people who watch and chart such things say that we have stopped the decline and we are actually seeing some growth, which technically means that the recession is over. Well, that is good news.

However, now some top economists are predicting another financial woe. In fact, many say it is inevitable. Economists are predicting that interest rates will start to go up, and up, and up.

Who is to say how far, how much?

They say it will likely first hit the housing market. Okay. With all of the excess inventory that is on the market that can?t be good, can it? Actually they say it may have already started (?). The rate for a 30-year fixed rate mortgage is up half a point since December, at 5.31%. That makes it the highest it has been since last summer. Yes, the interest rate is up comparatively, but?

At 5.31% it?s nothing compared to 12%, 13%, 17%. Yes, when it got that high is when we started seeing those negative amortization loans. And those were nasty. Nasty is actually one of the nicer words to describe a mortgage where you ended up owing substantially, yes, substantially more on the loan than you paid for the house in the first place, with zero benefit for you, the consumer, except that it was probably the only possible way that a lot of people could even get into a house at the time.

So interest rates may be going up, or not.

I?ll check my crystal ball and let you know what it says.

In the mean time you can read this article about the potential bad news about interest rates.