Interest Rates Rant

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FlyingPenguin
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Interest Rates Rant

Post by FlyingPenguin »

I've been saying for the past 2 years that the fed interest rate needs to go up. No one ever agrees with me. Homeowners worry about a high interest on mortgages and businesses love low interest loans.

HOWEVER the problem is that interest rates have been TOO LOW since the late 1990 - and especially after the last recession. This had negatively affected people because since that time since no one can earn any kind of decent interest on a savings account or CD. I can remember when savings accounts paid 5% and CDs paid 12% interest. Remember when there used to be Christmas savings accounts? I was joking with a bank rep about that the other day. He says older people still sometimes as about them, but they haven't existed in a long time - interest rates are so low that you'd get a few pennies at most.

Additionally, if you get into economics, the fed would like to raise rates (and they have been) during a good economy because that keeps a lid on inflation and, most important, gives them room to lower them again when the next recession rolls around to re-stimulate the economy.

Things are looking up though. I went to the bank to roll over a CD and was pleased to find that instead of the paltry .05% interest rate I was getting, my new rate is 2.65%.

We need banking interest rates to get back up to where someone can actually earn something. Yeah, that means loan rates will also go up but that's where they're supposed to be. You'll just need to price a new house by taking a higher mortgage into account - just like we did when rates were higher in the past.
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Err
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Re: Interest Rates Rant

Post by Err »

We're probably going to hit another recession in a couple of years. I'm not an economist but I know you don't cut taxes in a good economy. You also need to raise interest rates in a good economy. I looked at buying CDs a couple of years ago but the rates were so bad I couldn't be arsed to go down to the bank and do the paperwork.
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wvjohn
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Re: Interest Rates Rant

Post by wvjohn »

That has been one of my gripes as well. Banks have access to lots of money via the fed and all it's schemes so they don't have to pay us anything. I remember back in the late 80s I worked with a guy who got all his cash together and bought a 30yr 10% treasury bond. sweet.

Because there is little yield for saviings, people get pushed into the stock market chasing yield. A lot of the stuff in bond funds people buy for yield is absolute junk, and if things go south, they are going souther.

two sites I follow are naked capitalism and wolf street. Both have their own edge on things but lots of info and well done articles.
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reno
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Re: Interest Rates Rant

Post by reno »

today's rates suck for sure. home prices are inflated and still climbing in my area. my condo we bought in 2014 has over 5 time in net worth. yes we know we bought it when the market was at a all time low. we have updated it a bunch ( mostly cosmetic) but still not done new windows ,heat and air system or upgraded the electrical panel . I do have all these item on my list for the next couple of years . at today's rates it be about $15,000 total to do. me and the wife can still walk out if we sold today making a killing without doing the major repairs . we talked about it figured it still cost us about the same to move . then having to update are next place so all the money we make just turn into a wash.
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Executioner
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Re: Interest Rates Rant

Post by Executioner »

If you think your home prices are inflated, check out the Silicone Valley area. Prices for shacks are 6 figures.
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Losbot
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Re: Interest Rates Rant

Post by Losbot »

We bought at a good time, and got a good short sale. We also got our loan at 3.25% and the house has almost doubled in value.
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wvjohn
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Re: Interest Rates Rant

Post by wvjohn »

Wall street screaming now because Fed is cutting off the cheap money for their share buybacks and leveraged buyout. May get a bit ugly if all the FANG stocks dive even harder. Companies with multi-billion dollar caps that constantly lose money .
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reno
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Re: Interest Rates Rant

Post by reno »

we bought are condo at the perfect time . the price of the condo has over tripled in 4 years . just sold are michigan home at a good time to . im sure if we held off . used a realtor we could of got more for are home in michigan .but it also would of cost us more due to there commission fee . then who knows what what i would of had to do. to bring it up to the buyer requirements . we did have 3 cash buyers so im not second guessing myself .
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normalicy
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Re: Interest Rates Rant

Post by normalicy »

I was on the edge for buying a home about two years ago, but just couldn't convince myself. Kinda wishing I did now.
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FlyingPenguin
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Re: Interest Rates Rant

Post by FlyingPenguin »

Thought I'd revisit this topic since, as I mentioned at the top, the reason rates needed to go up the past two years, is to give the Fed a buffer to lower rates during an economic crisis.

Well we're at the crisis, and since rates didn't go up very much, there was no wiggle room this week as the Fed cut interest rates to the bone. The Fed essentially lost it's only major tool for cushioning the economic downturn.

And don't let people tell you that 'there's always negative interest rates'. Negative rates is not a good thing. Google it.
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normalicy
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Re: Interest Rates Rant

Post by normalicy »

It's convenient that I'm considering getting a new home or at least refinancing though. But yeah, this is a bad thing and I think they jumped the gun.
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Executioner
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Re: Interest Rates Rant

Post by Executioner »

Hard to believe they are at zero, but the banks are not passing that over to the consumers.
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Err
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Re: Interest Rates Rant

Post by Err »

I just checked and it doesn't look like auto loan interest rates have dropped yet either. The auto industry is going to need a shot in the arm when everything blows over.

My current car is paid off this year. I was thinking of getting something easier on gas and one day passing it to the kid if she ever starts driving. With the economy the way it is, I may be able to buy sooner than later.
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normalicy
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Re: Interest Rates Rant

Post by normalicy »

I was just reading an article today about why they aren't going down. It seems that demand is way up, so they don't feel any pressure to go down.
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Losbot
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Re: Interest Rates Rant

Post by Losbot »

People have been taking advantage of the rates, to buy homes and whatever else. Why would they lower them if there's still a steady demand?
Last edited by Losbot on Thu Mar 19, 2020 9:02 am, edited 1 time in total.
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