Comments on: Why 4% mortgages can really stimulate the economy http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/ Attempts at a Sustainable Lifestyle... Sat, 21 Nov 2009 16:47:07 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: mobile http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/comment-page-1/#comment-2943 mobile Tue, 03 Feb 2009 17:11:03 +0000 http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/#comment-2943 The interbank rate is low, but that rate is for short term loans. A 30-year loan at 4% might be profitable for a bank in the short term, but if the economy is booming again in, say, 10 years, and the bank has to offer 5% interest on savings accounts and CDs to get deposits, then it doesn't look so good. Also, easy credit and low (many would say artificially low) interest rates were a big factor in this mess. Keeping long term interest rates low by legislative fiat will not get us out. The interbank rate is low, but that rate is for short term loans. A 30-year loan at 4% might be profitable for a bank in the short term, but if the economy is booming again in, say, 10 years, and the bank has to offer 5% interest on savings accounts and CDs to get deposits, then it doesn’t look so good.

Also, easy credit and low (many would say artificially low) interest rates were a big factor in this mess. Keeping long term interest rates low by legislative fiat will not get us out.

]]> By: admin http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/comment-page-1/#comment-2937 admin Mon, 02 Feb 2009 19:42:18 +0000 http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/#comment-2937 You are right, it's 33% savings on the mortgage interest, but in the first 7 to 10 years of a 30 year loan most of people's mortgages are mostly interest. So the savings are significant enough. Additionally, from what I read it seems that the government wants to offer a 30 year 4% fixed rate for about 1 to 2 years. Which means whoever refinances within these 1 to 2 years can get a 4% rate for 30 years. It's not that the rate will go up after 3 years. You are right, it’s 33% savings on the mortgage interest, but in the first 7 to 10 years of a 30 year loan most of people’s mortgages are mostly interest. So the savings are significant enough. Additionally, from what I read it seems that the government wants to offer a 30 year 4% fixed rate for about 1 to 2 years. Which means whoever refinances within these 1 to 2 years can get a 4% rate for 30 years. It’s not that the rate will go up after 3 years.

]]> By: SP http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/comment-page-1/#comment-2936 SP Mon, 02 Feb 2009 19:17:20 +0000 http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/#comment-2936 As a renter who still isn't ready to buy, I feel pretty left out of all this stimulus stuff. But I do think you are right, this could really help out a lot of responsible people. As a renter who still isn’t ready to buy, I feel pretty left out of all this stimulus stuff.

But I do think you are right, this could really help out a lot of responsible people.

]]> By: Ben http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/comment-page-1/#comment-2935 Ben Mon, 02 Feb 2009 18:43:25 +0000 http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/#comment-2935 "..means that they would save 33% on their mortgage" Not really... It's only the "mortgatge interest" that is saved, in the signed 3 years. In the next term, when you have to refinance again, you might not be able to get the same rate, if all the banks hike the rate (as usual). So, can we save "from $200 to $500 a month" in these 3 years? it really depends on the repay plan. I don't have my financial calculator handy. If the mortgage is 200,000, and we plan to pay it in 20 years, how much we need to pay if the interest rate is 6%, or 4%? Some people will take advantage of the low mortgage by paying MORE in these 3 years. They stop spending money on other things, because they know the rate will go up later! “..means that they would save 33% on their mortgage”
Not really… It’s only the “mortgatge interest” that is saved, in the signed 3 years.
In the next term, when you have to refinance again, you might not be able to get the same rate, if all the banks hike the rate (as usual).

So, can we save “from $200 to $500 a month” in these 3 years? it really depends on the repay plan.

I don’t have my financial calculator handy. If the mortgage is 200,000, and we plan to pay it in 20 years, how much we need to pay if the interest rate is 6%, or 4%?

Some people will take advantage of the low mortgage by paying MORE in these 3 years. They stop spending money on other things, because they know the rate will go up later!

]]> By: Matt @ StupidCents http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/comment-page-1/#comment-2934 Matt @ StupidCents Mon, 02 Feb 2009 15:28:15 +0000 http://baglady.dreamhosters.com/2009/02/02/why-4-mortgages-can-really-stimulate-the-economy/#comment-2934 I've been waiting on the sidelines to purchase a new home. If the interest rates were to fall to 4% and the <a href="http://www.stupidcents.com/2009/01/28/first-time-homebuyers-20000-tax-credit-being-discussed/" rel="nofollow">potential $20,000 first-time home buyer credit</a> would be approved, I don't why I wouldn't take advantage of that and purchase a house. The only downside is that sellers may increase their prices to capture more capital. Stupidly Yours, Matt I’ve been waiting on the sidelines to purchase a new home. If the interest rates were to fall to 4% and the potential $20,000 first-time home buyer credit would be approved, I don’t why I wouldn’t take advantage of that and purchase a house.

The only downside is that sellers may increase their prices to capture more capital.

Stupidly Yours,

Matt

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