Friday, April 1, 2022

Interest Rates Panic

People are panicking about the rise in interest rates. If you bought a house at a low rate with an adjustable mortgage that’s a reasonable reaction. People lose houses when that happens. It’s going to be bad for a lot of people. 

However, it is like they say, every crisis is also an opportunity. Back in the 80s I bought my first house with an 18% interest rate. Sounds insane, I know. It was also an adjustable rate. People thought I was nuts. Back then people were talking Weimer Republic rates of inflation. Since rates had shot up to 18% percent they thought there was no reason to see rates go much much higher. 

The funny thing is my monthly payment was really cheap, much less than the rent we were paying. House prices had collapsed because no one was buying. My wife and I picked up a small fixer-upper and moved in six weeks later. It was a great house for us. Every time the rate was adjusted my payment went down. During those years my lovely wife quit work for a few years to take care of our young children. 

Had we gone with the prevailing conventional wisdom at the time the opportunity would have passed us by. 

I am not saying the same thing will happen this time around. For all I know we could get to Zimbabwe rates. What I am saying is to look at the details and make your own decisions. 


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