Why not? When rates go down, so do my mortgage payments. Sometimes by hundreds of dollars. That’s free money. Even if they go back up, I’m still ahead.
Let’s say I don’t have any significant investments, and I’m slightly upper middle income. And my retirement is secure. So in the short term (my lifetime) what’s to worry?
I’ve read opinions, but they all talk about the effect on the economy and rich people’s losses.
Know what I mean?
Peace,
mangeorge
What kind of mortgage do you have? How often is the rate reset?
Lower interest rates may mean you pay less on your mortgage, but it also means you get less return on your interest-earning deposits. So, depending on your particular situation, it might be good for you, but not-so-good for someone else.
Variable. It’s a VA loan, and the rate increase/decrease is prescribed. I don’t recall how or when it’s reset.
What different does that make? I realize it can go back up, but not retroactively. So anything I save is mine, and if it goes down, that sets a new starting point.
True, but rates have been so low for so long anyone who has money in an interest bearing account is throwing away any real money making opportunities. Sure I’ve got some cash in savings (ING online… way better than a physical bank for interest), but even that is pretty lame when it comes to returns.
So I agree, I’ll take a little less interest income in exchange for lower interest rates on my mortgage any day.
Since there was no question asked in the OP, I’m gonna do a minor hijack (still interest rate topic) and point out that for years, credit card companies claimed their 18-20% interest rates were necessary to make up losses from frequent customer bankruptcies. Of course a couple of years ago, when bankruptcy laws were changed (thanks to a Republican controlled Congress) so that folks in trouble couldn’t get out of what they owed to credit cards, the companies generously responded by lowering interest rates to be fair.
Oh, wait… no they didn’t. They’re STILL fucking us with the high APR’s.
(I keep mine paid off, but the concept still pisses me off.)
To be fair, do you have any cites that indicate they actually make this claim? In my experience, they charge what the market will bear. I haven’t had such a crappy credit card in ages, since the times when my credit was even less than questionable. There are lots of cards out there with low rates for people that deserve them. They deserve them because they have credit scores that let them competitively shop. There are also credit cards with substantially worse rates than you indicate, because there are people with bad credit that wish to continue in that vein. The new laws stop abuses. If you can pay, they make you pay. If you can’t, you still get absolution. I’ve had bad credit, and there’s always the possibility that circumstances will make it easy for me to have bad credit again, but only if I’m irresponsible enough to let it happen (or unlucky, in certain respects).
I don’t think it makes much of a difference I was just curious. I agree with you that when your interest rate goes down you save money and that the money you save does not go to someone else.
I personally would only take out a variable loan only if the current interest rate was substantially lower than the prevailing fixed rate loans. Especially in times like the past 7 or 8 years with interest rates being low.
I have an actual trustworthy mortgage broker, who (when we bought our house 5 years ago) told me to take the super-low interest introductory rate, but to make payments as if it were a 30-year fixed rate mortgage. (He knew I had the discipline to actually do this.)
At the end of 7 years, I’ll have paid off substantially more principal than had I taken a standard fixed rate mortage. Yes, my interest rate will go up at that point, but there’s a cap of about 2%/year max… so I should end up nicely ahead because the higher rate will be on a lower amount owed…
And make sure you do twice monthly half-payments as opposed to monthly payments, if your mortage holder allows it and doesn’t charge extra. Another way to get ahead of the curve.
And no, don’t have cites on the credit card claim, you’re correct. I don’t mind they made it harder to declare bankruptcy, but I think it should have had a caveat forcing interest rates down at least a little.