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I suspected that low interest rates would be around for a while, if not forever. So when I got my mortgage, I got the 7/1 ARM, instead of the standard US 30-yea
by jonny_eh 9y ago
I suspected that low interest rates would be around for a while, if not forever. So when I got my mortgage, I got the 7/1 ARM, instead of the standard US 30-year fixed.
- jganetsk 9y agoThe paper is talking about the overnight, risk-free interest rate, not a long-term mortgage, which is just one point on the yield curve. If we think of the yield curve as a 3D graph, where one axis is interest rate, another axis is term, and a third axis is risk, then the paper is claiming that there is a point at (0, 0, 0). But central banks often change the interest rate to something non-zero at (0, 0).