Interest Rates: A Stagnant Pond Or Boiling Milk?


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They have been very low for a long time and the subject begins to appear on the headlines of major publications. Will they stay as they are for some time to come, as they say or…?

The Experts

Experts give their opinions, some stating that the interest rates will stay as they are for some time yet, according to the “global flow of economy” and others are not so sure about where they will go next and when. Both give plausible reasons for their statements but being at the bottom end of the chain, as mortgage borrowers are, we must analyze things in a simpler way than resorting to complex financial knowledge.

A Simple Point Of View

As I see it, when there are a whole lot of explanations for something that is in essence, very simple, like the well-known offer-and-demand law, I begin to look out for a catch that could sooner or later make me feel like an idiot.

The Current Rates

The current Federal Reserve interest rates have been as they are since 2003 and in turn, loan rates have kept close up, since everything is linked together and one swipe of a hand at Fed rates can leave many ordinary people happy or in a terrible state of despair.

Global Matters

The US as a country is immersed in the global economy, more than some American citizens would be pleased with, and when one makes changes, the other suffers or cashes in the benefits. International affairs such as warfare, oil or a crashing third-world economy can have a certain impact on a leading country and in turn on its population.

Those who state that rates will be stable for 5 to 7 years actually do not know what unexpected international happening will make them take back what they said some time ago…

Why Do I bring This In?

Well, specifically I am referring to those who predict the course of events in the shorter or longer term. Is it “Rates will remain low, no worries”? Or, “They are bound to shoot up, so watch out”? I think neither is totally right or wrong.

What I mean is that loan takers, especially mortgage borrowers, since these are long-term loans, should do their best to be on the safe side and prefer fixed rate mortgages to the adjustable ones. Those who have adjustable mortgages dated prior to 2003 and have the option to change might do well in swapping to a fixed rate mortgage, if they have not already done so.

The Explanation

It is very simple: Paraphrasing the old Limbo Rock Lyrics, “how low can you go”, can we think of a further decrease? So, considering that the housing market is safely quiet and consumers can keep spending, would you deem this is a good moment for investing in property?

Use a healthy mortgage loan and take advantage of the current rates while they are still low. And considering the low price of property, it is a good alternative to using the equity in devaluated homes.

Kate Ross is a professional consultant at . Smart tips and interesting articles on this subject and other financial related topics can be found in her website.


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