Mortgage rates are a crucial piece of the transition to a post-quantitative easing economy. “Normal”, historically, would be 7%, or roughly double the rate that ignited the past year’s mini-housing bubble.
What would this do to the average buyer’s ability to get out of their existing house and into a bigger, better one? It would definitely change the calculation for the worse, but how much worse? The answer is probably not within the housing market but the overall economy. Things nearly fell apart back in 2009 because society-wide debt had grown to unmanageable levels. The only way to keep the system together was for interest rates to fall to the point where debt service costs were commensurate with a much smaller debt load.
In the ensuing four years we’ve lowered consumer debt a bit but replaced it with a more-or-less equal amount of government debt. So the system remains just as leveraged as it was in 2008. The plan seems to be to take that same amount of leverage and impose the interest rates on it that were in place in 2008, and to hope for a different outcome. As with so many other things, you have to wonder if they’ve thought this through.
Read the complete article at The Dollar Collapse here.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.