Everybody’s doing it
When I bought a house last year, I was able to lock in a 3.6% fixed rate for 30 years. These days, it has gone down to 2.8% according to LendingTree and houses have never been so affordable.
Money is so cheap, everyone is taking advantage of it.
But still, the cost of money in the US remains relatively high compared to other advanced economies.
Very low (to no) interest
On my recent 3-week vacation to Europe, which gave me a glimpse of what Early Retirement looks like, I learned that people have been buying houses last year on 15 year loans with mortgage rates of about 2%.
I started to dig into rates available across the globe, for different terms and what I found what stunning. Some countries borrow at negative rates and banks have been thinking of charging their customers’ deposit to pass the rate through. Others have found investors who agreed to lend money for 100-year terms.
In all cases, the gap with the rates in the US is huge. Where are our rates going?
The US Central bank wants to increase the interest rates further this year. To me, this looks like a tough proposition.
If the rates indeed increase, the gap with the rest of the developed economies will grow, the interest for the dollar will rise and the currency will appreciate. Global companies will yet again blame their lackluster results on the strong dollar.
If the rates cannot be increased, there is then a chance that they will be pulled to the bottom by the rest of the world economy and we would soon be able to buy houses with 2% interest rates.
Readers, where do you think the interest rates are going? Do you think there is a chance the Fed will actually increase them or are we headed towards 0 like Europe and Japan? Wouldn’t it be nice to have 30-year mortgages at 2%?