About Interest Rates

[Phil Nilsson]

Interest rates have been on the rise recently and Chairman Greenspan warned that continued deficit spending to support the war in Iraq will soon be felt in the short term markets as well. You might want to look at your total loans at this time for consolidation before mtge and equity loan rates rise higher.

Phil

[Stephen M.]

Good point Phil. The nations economic recovery is set to tank again because of those deficits and that means my mutual fund is in peril. According to a respected Wall Street Guru who acturately predicted the last bear market, this coming one will be worse than our last one. The economic rally we are enjoying now is but a mere blip on the radar and we would still be in the bear market if it wasn't for the artificial market manipulations of the government.

I personally would hope this isn't correct, but then I'm not an economist either.

[Phil Nilsson]

You're right. When the Government "borrows" money via a deficit ... it cuts into the supply of money ... it competes for money with the private sector thus having the tendency to drive interest rates up.

Phil

[Elwood]

Sad thing is, when interest rates do rise, those who financed with a variable rate (real estate generally) will have a higher payment, that they may not be able to afford. Then the house goes on the market and because of higher interest rates, less people can afford it.

People (unfortunately) have become payment shoppers when buying and building houses and when the interest rates go up, the blocks will come tumbling down.



Of course I heard on the radio the other day that inflation in the real estate market in the New York and L.A. areas is getting out of hand and interest may rise to control that a bit too.

At any rate, interest will probly stay the same until after the election, then it will creep up.

[Stephen M.]

The only positive with high interest rates is that our saved money will make more than the lousey 1% + or - it now gets. However, those of us who remember the high interest rates and inflation under Jimmy Carter would not want to go there again if at all possible.

At least I have loans locked into low rates that won't rise with inflation.