Our friend Ben Carlson opines on, Why Higher Interest Rates Haven’t Mattered (Yet). Included with this post is this handy pie chart:
The proposition is that the overwhelming majority of home borrowers have locked in very low rates and are unaffected by the recent rate increases.
It is hard to disagree with that, but we're pretty sure it doesn't tell the whole story. Most commercial and investment loans are variable rate mortgages. Typically, they are fixed for a three- or five-year period, then they adjust to reflect the current market conditions. We believe that there is a bit of turmoil ahead as those loans adjust over the next year or so. As an example, we recently had a five-year adjustable-rate mortgage adjust from 3.75% to 8.25%. Yeow. Fortunately for us, we were able to pay the loan off. Not all borrowers we be as fortunate. Stay tuned.
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