5 ms·

Variable rate loans make a lot of sense. It’s still strange to me that in the USA I can get a 30 year FIXED mortgage at 2.75% when inflation was 7%. Makes “inf

Variable rate loans make a lot of sense. It’s still strange to me that in the USA I can get a 30 year FIXED mortgage at 2.75% when inflation was 7%. Makes “inflated” housing look cheap. Doesn’t really make sense that it’s even offered.

dragonwriter 5y ago
> It’s still strange to me that in the USA I can get a 30 year FIXED mortgage at 2.75% when inflation was 7%. A variable 2.75% with inflation at an unusually high 7% would be weirder than a fixed; a variable rate loan has a rate based on current conditions, a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.) Now, it may seem weird that you can get a 30-year fixed loan at all, but once you accept that, having the rate below current inflation when inflation has been at a unusually high level for a shirt period of time isn't particularly odd.
- rndphs 5y ago
  I think you can usually refinance a fixed rate mortgage to an adjustable rate one at any point. Or refinance to a different fixed rate one with lower rates if the opportunity arises.
- ethbr0 5y ago
  > ... a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.) Is that accurate to say? Because I don't think so. It seems more accurate to say mortgage rates for fixed loans are set by the cost of money at purchase / loan-initiation time. Which makes sense, as that's when funds are actually changing hands (from purchaser's lender to seller). And ultimately, that's banks' cost of money, which means then-current Fed rate + spread, no?
JumpCrisscross 5y ago
> Doesn’t really make sense that it’s even offered. Nobody serious is betting inflation will remain at 7%. That was an annualised rate from a single reading.
nsv 5y ago
You can get these low interest rates because the government subsidises them. If it were a "free market" so to speak you would not be able to get such a rate, and possibly would not be able to get a fixed-rate mortgage at all.

dragonwriter 5y ago

> It’s still strange to me that in the USA I can get a 30 year FIXED mortgage at 2.75% when inflation was 7%. A variable 2.75% with inflation at an unusually high 7% would be weirder than a fixed; a variable rate loan has a rate based on current conditions, a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.) Now, it may seem weird that you can get a 30-year fixed loan at all, but once you accept that, having the rate below current inflation when inflation has been at a unusually high level for a shirt period of time isn't particularly odd.

rndphs 5y ago
I think you can usually refinance a fixed rate mortgage to an adjustable rate one at any point. Or refinance to a different fixed rate one with lower rates if the opportunity arises.
ethbr0 5y ago
> ... a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.) Is that accurate to say? Because I don't think so. It seems more accurate to say mortgage rates for fixed loans are set by the cost of money at purchase / loan-initiation time. Which makes sense, as that's when funds are actually changing hands (from purchaser's lender to seller). And ultimately, that's banks' cost of money, which means then-current Fed rate + spread, no?

JumpCrisscross 5y ago

> Doesn’t really make sense that it’s even offered. Nobody serious is betting inflation will remain at 7%. That was an annualised rate from a single reading.

nsv 5y ago

You can get these low interest rates because the government subsidises them. If it were a "free market" so to speak you would not be able to get such a rate, and possibly would not be able to get a fixed-rate mortgage at all.