Finance Dave
Thinks s/he gets paid by the post
- Joined
- Mar 29, 2007
- Messages
- 1,864
Tell me if you think this could play out....
Given today's historically low mortgage rates, many people are refinancing and getting new loans. I believe interest rates will rise to a moderately high level again...let's say 7-8%....at some point in the next 10 years. When that happens, people will not be able to afford new mortgages if they want to keep a similarly priced house.
As a result, I think mobility will become an issue...people will tend to stay in their houses, avoid job changes that force a relocation, and so on. The market will become somewhat stagnant.
Then, banks will be staring at the fact that they offer 8% mortgage loans, but no one willing to take on mortgages at those "high" rates given that they have 3.5% mortgages they opened years before (today). As a result, I fear one of two things:
1) A lot of banks (those who make money on mortgages) will go out of business since they cannot generate returns consistent with the then-current rates.
2) The banks will have to find other ways to make money, and this will result in increased fees of some sort.
What do you think? For this exercise...let's all assume rates do rise to 7-8% at some time in the next 10 years....do you think either of my concerns above are valid?
One other thing that may play into this is demographics. Young people coming up will buy a mortgage almost regardless of the rate. Older people who are retired often have their homes paid for. So mostly I'm thinking of the people in between. With the boomers retiring in record numbers...this could play into the whole thing.
I will be unaffected I think...as I won't have any loans outstanding, and will be able to change banks easily if fees become an issue...but I think something's gonna have to give.
Given today's historically low mortgage rates, many people are refinancing and getting new loans. I believe interest rates will rise to a moderately high level again...let's say 7-8%....at some point in the next 10 years. When that happens, people will not be able to afford new mortgages if they want to keep a similarly priced house.
As a result, I think mobility will become an issue...people will tend to stay in their houses, avoid job changes that force a relocation, and so on. The market will become somewhat stagnant.
Then, banks will be staring at the fact that they offer 8% mortgage loans, but no one willing to take on mortgages at those "high" rates given that they have 3.5% mortgages they opened years before (today). As a result, I fear one of two things:
1) A lot of banks (those who make money on mortgages) will go out of business since they cannot generate returns consistent with the then-current rates.
2) The banks will have to find other ways to make money, and this will result in increased fees of some sort.
What do you think? For this exercise...let's all assume rates do rise to 7-8% at some time in the next 10 years....do you think either of my concerns above are valid?
One other thing that may play into this is demographics. Young people coming up will buy a mortgage almost regardless of the rate. Older people who are retired often have their homes paid for. So mostly I'm thinking of the people in between. With the boomers retiring in record numbers...this could play into the whole thing.
I will be unaffected I think...as I won't have any loans outstanding, and will be able to change banks easily if fees become an issue...but I think something's gonna have to give.
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