5 ms·

Money becomes more expensive to borrow.

by jdubs 11y ago

pen2l 11y ago
Harder to buy a house, rents might go up, etc. Also, harder to raise capital for startups. Though that's probably a good thing that the bar is raised -- will be better in the long term for everyone.
- arbitrage 11y ago
  No, likely easier. Think of it this way. Borrowing money costs you more, but makes the lender more money in interest. Lenders now have more of an incentive to loan out money, because they'll actually be earning more (eventually) on it.
  - monknomo 11y ago
    But if pen2l was a marginal borrower before the rate hike, this might have disqualified him (without a bigger down payment anyhow)
- czinck 11y ago
  Not really, any long term fixed rate loan had this priced in for months. In fact, the FNMA 30 year interest estimate is slightly lower now than when it opened, opened at 3.040% and is currently at 3.019% (sorry, no internet source available for that or I'd link it). The question this morning was if they were going to raise the rates today or next quarter and by how much, not if they were going to. Edit: It's now moved up to 3.048%, but either way, my point is that whether you closed on a long term fixed rate loan yesterday or today doesn't really matter.
  - danieltillett 11y ago
    The fact that we can borrow at 3% for 30 years and we don't use this to invest in productive infrastructure assets is insane.
    - encoderer 11y ago
      Who is we? The federal govt can borrow at far lower rates than 3%.
      - Renevith 11y ago
        Not for 30 years. In fact, as of yesterday 12/15, the 30-year treasury rate was exactly 3.00%. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...
        encoderer 11y ago
        Great link, thank you!
      - danieltillett 11y ago
        We the people. I was being a bit generous with the we bit since I am Australian, but the same thing applies to our government too. My state just sold off a hugely productive piece of infrastructure (electricity poles and wires) to pay down debt. The crazy thing is the infrastructure returned twice as much per year in dividends than the interest on the debt retired.
- fludlight 11y ago
  > Harder for me to buy a house. Bummer. Yes and no. Yes because the monthly payment on a new mortgage for a given purchase price just went up. No because that payment went up for everyone by the same amount at the same time, so purchase prices will (theoretically) adjust downward. Keep in mind that today's news means a bak will lend you money at 4% instead of 3.75%, so the effect is minimal. Other factors that influence the housing market such as strength of the local economy and availability & quality of financing won't be affected unless we see substantial rise in rates.
  - bmm6o 11y ago
    > No because that payment went up for everyone by the same amount at the same time The rate is more significant the more you borrow, and not everyone has to borrow the same amount to buy the same hypothetical home. Buyers who have to borrow more are less attractive to sellers, ceteris paribus, since there's a greater chance of the deal falling through. But if we're talking about a .25% difference, it won't have a real measurable effect.
    - deleted 11y ago
      [deleted]
pc86 11y ago
It is now marginally more expensive than "free."

Money becomes more expensive to borrow.

by jdubs 11y ago

Money becomes more expensive to borrow.

pen2l 11y ago

Harder to buy a house, rents might go up, etc. Also, harder to raise capital for startups. Though that's probably a good thing that the bar is raised -- will be better in the long term for everyone.

arbitrage 11y ago
No, likely easier. Think of it this way. Borrowing money costs you more, but makes the lender more money in interest. Lenders now have more of an incentive to loan out money, because they'll actually be earning more (eventually) on it.
- monknomo 11y ago
  But if pen2l was a marginal borrower before the rate hike, this might have disqualified him (without a bigger down payment anyhow)
czinck 11y ago
Not really, any long term fixed rate loan had this priced in for months. In fact, the FNMA 30 year interest estimate is slightly lower now than when it opened, opened at 3.040% and is currently at 3.019% (sorry, no internet source available for that or I'd link it). The question this morning was if they were going to raise the rates today or next quarter and by how much, not if they were going to. Edit: It's now moved up to 3.048%, but either way, my point is that whether you closed on a long term fixed rate loan yesterday or today doesn't really matter.
- danieltillett 11y ago
  The fact that we can borrow at 3% for 30 years and we don't use this to invest in productive infrastructure assets is insane.
  - encoderer 11y ago
    Who is we? The federal govt can borrow at far lower rates than 3%.
    - Renevith 11y ago
      Not for 30 years. In fact, as of yesterday 12/15, the 30-year treasury rate was exactly 3.00%. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...
      - encoderer 11y ago
        Great link, thank you!
    - danieltillett 11y ago
      We the people. I was being a bit generous with the we bit since I am Australian, but the same thing applies to our government too. My state just sold off a hugely productive piece of infrastructure (electricity poles and wires) to pay down debt. The crazy thing is the infrastructure returned twice as much per year in dividends than the interest on the debt retired.
fludlight 11y ago
> Harder for me to buy a house. Bummer. Yes and no. Yes because the monthly payment on a new mortgage for a given purchase price just went up. No because that payment went up for everyone by the same amount at the same time, so purchase prices will (theoretically) adjust downward. Keep in mind that today's news means a bak will lend you money at 4% instead of 3.75%, so the effect is minimal. Other factors that influence the housing market such as strength of the local economy and availability & quality of financing won't be affected unless we see substantial rise in rates.
- bmm6o 11y ago
  > No because that payment went up for everyone by the same amount at the same time The rate is more significant the more you borrow, and not everyone has to borrow the same amount to buy the same hypothetical home. Buyers who have to borrow more are less attractive to sellers, ceteris paribus, since there's a greater chance of the deal falling through. But if we're talking about a .25% difference, it won't have a real measurable effect.
  - deleted 11y ago
    [deleted]

pc86 11y ago

It is now marginally more expensive than "free."