Inflation here? gas/grocery prices just continue to climb

brandon8283 said

Believing that this is a short-term spike is betting against history, however. Outside of the easy money times post-Great Recession and again post-COVID, historical rates have almost always been above 6%, and in the 80s, another time of runaway inflation similar to now, the rates were as high as 14%.

In recent history, interest rates were starting to creep back up from around 2013-2019, right around the time we were truly in full recovery from the Great Recession, before they crashed again from COVID.

It's VERY possible that this is not a short-term spike, but rather a return to where interest rates would have been if not for the Great Recession and COVID.

https://www.freddiemac.com/pmms/pmms30

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I think there is a good chance you are correct. I see how a return to late 70s economic conditions is very possible. I also see a 40yr downward trend for rates with occasional 2.5-2.75% spikes along the way. We went way low on mortgage rates rapidly and I think a run up to 6.5-7 is possible.

I just don’t see that as a sustainable rate. Consumers, business, and governments are so reliant on debt today that small increases in rates have a much bigger effect than in the 70s. I also see homeowners flipping out when property values drop 20-25% because rates are 6.5-7.5%. That would bring the housing market to a standstill.

I think we are going to see a less than 5-year spike in rates and a return to sub-5%. That’s why I’d do a 5/1 ARM today for 1-1.25% below fixed rates of 5.25%. But again, you could be right and I just may be more risk tolerant.