FYI: I’m going through the process of refinancing my mortgage. It’s wild how low rates are at the moment.
When we bought our first home in late-2007/early-2008 our first 30 year fixed rate loan was in the 6.25% to 6.50% range. I’m currently dropping from 4.50% to 3.75%. Eventually there is a law of diminishing returns when you compare monthly price drops, but when you add up those payments over the course of the loan it can be a huge number.
This got me thinking about how maybe the framing of the low-interest rate environment misses a huge point.
Investors are mostly angry at low rates because they can’t earn higher yields in “safer” assets such as treasury bonds or money market funds like they could in the past. I’m sure almost every retiree on the planet would take the 6%-7% treasury yields that were present for a time during the early-1990s and be done with it.
Low rates are painful for investors because they more or less lower expected returns across the board in all asset classes.
Lots of people say lower interest rates only help the wealthy because they’re the ones that hold all the financial assets (and most believe low rates have propped up financial assets).
This is a legitimate gripe in many ways but low rates should also be helping the middle class in the real estate market. There is a silver lining from a personal finance perspective in all of this.
Regards,
Ted
https://awealthofcommonsense.com/2019/11/refinancing-gains-in-real-estate/
