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Old 03-02-2013, 06:40 AM  
BigRedChief BigRedChief is offline
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Interest rates. WTF? Why are we getting almost free money?

I put a contract on a house yesterday. Locked in a rate and loan. Got 3.625 and they gave me $8,800 towards closing costs. Which is obviously more than it costs.

We were able to lower the purchase price because we didn't have any closing costs.

Last time we bought a house we got 5.25% which at the time our loan guy said was the lowest rate since WWII.

So my question for the board is why is the public getting home loans that are maybe 1%-2% above inflation? Where's the money being made or lost?
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Old 03-02-2013, 08:52 AM   #2
petegz28 petegz28 is online now
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It's called the federal reserve keeping rates at artificially low levels and devaluing our $ by printing a shitload of what is becoming worthless paper
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Old 03-02-2013, 08:53 AM   #3
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Old 03-02-2013, 08:54 AM   #4
petegz28 petegz28 is online now
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Btw, the money is being sorta made by the fed gov getting debt rates at extremely low levels and the money being lost is of course at the tax payers expense on various forms of hidden taxes
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Old 03-02-2013, 09:01 AM   #5
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30-yr tbill rates are 3.06 pct right now, so there is still room for profit there but not much. It's going to be a skinny margin though because there is an oversupply of capital and less demand for mortgages. The big risk is that the real rate of return could go negative pretty quickly if inflation were to take off.
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Old 03-02-2013, 09:03 AM   #6
BigRedChief BigRedChief is offline
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Quote:
Originally Posted by petegz28 View Post
Btw, the money is being sorta made by the fed gov getting debt rates at extremely low levels and the money being lost is of course at the tax payers expense on various forms of hidden taxes
Where is this hidden cost?
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If it's effective, who are you, me, or anybody else to call it abuse? I worked with a guy back in Moberly who would shove a finger up his son's ass each time he had anything worse than a C on his report card. If he came home with 2 D's and an F, that's 3 fingers (and this was a big dude). Does that sound hideous and disgusting? Absolutely. Did the kid ever get anything worse than a C after this rule was implemented? Not a chance.

I'm not saying it's morally right or wrong, but does it make the child because of it? Think about that for a second.
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Old 03-02-2013, 09:04 AM   #7
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Originally Posted by prhom View Post
30-yr tbill rates are 3.06 pct right now, so there is still room for profit there but not much. It's going to be a skinny margin though because there is an oversupply of capital and less demand for mortgages. The big risk is that the real rate of return could go negative pretty quickly if inflation were to take off.
So banks have too much money and not enough people wanting to borrow it?
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Originally Posted by Bufkin View Post
If it's effective, who are you, me, or anybody else to call it abuse? I worked with a guy back in Moberly who would shove a finger up his son's ass each time he had anything worse than a C on his report card. If he came home with 2 D's and an F, that's 3 fingers (and this was a big dude). Does that sound hideous and disgusting? Absolutely. Did the kid ever get anything worse than a C after this rule was implemented? Not a chance.

I'm not saying it's morally right or wrong, but does it make the child because of it? Think about that for a second.
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Old 03-02-2013, 09:33 AM   #8
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Originally Posted by BigRedChief View Post
Where is this hidden cost?
Higher food and energy costs, eroded value of savings
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Old 03-02-2013, 09:36 AM   #9
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Originally Posted by petegz28 View Post
Higher food and energy costs, eroded value of savings
What is the connection? How does low interest rates cause those losses?
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Attempted troll/humor while discussing potential child abuse
Quote:
Originally Posted by Bufkin View Post
If it's effective, who are you, me, or anybody else to call it abuse? I worked with a guy back in Moberly who would shove a finger up his son's ass each time he had anything worse than a C on his report card. If he came home with 2 D's and an F, that's 3 fingers (and this was a big dude). Does that sound hideous and disgusting? Absolutely. Did the kid ever get anything worse than a C after this rule was implemented? Not a chance.

I'm not saying it's morally right or wrong, but does it make the child because of it? Think about that for a second.
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Old 03-02-2013, 09:36 AM   #10
Mr. Flopnuts Mr. Flopnuts is offline
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Originally Posted by BigRedChief View Post
So banks have too much money and not enough people wanting to borrow it?
More like not enough people qualifying to borrow it.
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Old 03-02-2013, 09:40 AM   #11
BigRedChief BigRedChief is offline
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Originally Posted by Mr. Flopnuts View Post
More like not enough people qualifying to borrow it.
I have good credit but not perfect at all. My debt to income ratio is average. Whats considered bad credit these days?

And now after I locked in I hear there are 3.3% loans out there.
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Quote:
Originally Posted by Bufkin View Post
If it's effective, who are you, me, or anybody else to call it abuse? I worked with a guy back in Moberly who would shove a finger up his son's ass each time he had anything worse than a C on his report card. If he came home with 2 D's and an F, that's 3 fingers (and this was a big dude). Does that sound hideous and disgusting? Absolutely. Did the kid ever get anything worse than a C after this rule was implemented? Not a chance.

I'm not saying it's morally right or wrong, but does it make the child because of it? Think about that for a second.
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Old 03-02-2013, 10:15 AM   #12
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Old 03-02-2013, 10:18 AM   #13
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Old 03-02-2013, 10:20 AM   #14
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Old 03-02-2013, 10:24 AM   #15
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Quote:
Originally Posted by BigRedChief View Post
What is the connection? How does low interest rates cause those losses?
lower interest rates mean lower value of the US $. Commodities sucha s oil and food are denominated in US $'s. Therefore, basic econ 101 tells you that if the currency in which a commodity is denominated decreases in value, the prices od said commodities increase in value.

I have been saying this on this board for the last several years now.

As far as savings goes, people on fixed incomes or who otherwise depend on traditional forms of savings are making absolutely dick in interest and by the time you factor in taxes and inflation they are actually losing money net-net.
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