I pulled a Rip Van Winkle--interest rates

[John105]

I happened to come across the prime rate today, sorta triggered because I got a credit union teaser email saying car loan rates as low as 4.54%.

I was thinking, hmmm...I remember when I was contemplating a car loan it was 1.9% lol

Seems the prime rate is 7.75% and mortgages are over 7? I literally have been asleep at the wheel on this one! (I do know my internet savings is at 3.4% which is a clue loan rates would be up there.)

 

[PWMDMD]

Maybe it's because I'm in business school taking courses on finance but yeah...the Fed and rising interest rates have been all over the news for months and months. If it makes you feel better I often feel that way about pop culture things, especially related to current music. People say names of songs and artists' names and not only have I never heard the song but I've never heard the name.

 

[wander2039]

My wife has telling me about a friend that got a mortgage for 7% and that's the norm now. I didn't know that either!

 

[Pablo]

Look at what money markets are paying. Near 4%. Not that long ago, hardly 0.5%. Not sure how much higher, things ARE slowing.

The FED oversteps, and blammy.

 

[mrsilv04]

Yes, it has been happening. I deposited a chunk of money with Discover late last year, due to their interest rates that none of the local banks can touch, and a cash bonus for depositing money with them. Now I need to get it out of there and move it somewhere else, because of recent news about Discover.

 

[Lubener]

My wife has telling me about a friend that got a mortgage for 7% and that's the norm now. I didn't know that either!

That was a good rate back in the mid 90's. We all got spoiled in the last ten years.

 

[Snagglefoot]

Yep, the fed rate has been going up for all of 2022. Money was almost free before. If you want to see it go down again we’ll need another disaster.

 

[PWMDMD]

Look at what money markets are paying. Near 4%. Not that long ago, hardly 0.5%. Not sure how much higher, things ARE slowing.

The FED oversteps, and blammy.

The Fed has a real problem right now because of all those years of "free money". Prior to 2008, there was a much larger group of Americans with variable-rate loans and in that era, increasing rates had a profound effect on economic activity. Now, most people have fixed-rate loans at crazy low-interest rates and increasing rates has little to no effect on a huge number of people.

Not only that but these people now have access to MM accounts paying almost 5%. Equities are down but my emergency fund is giving some nice returns.

The end result is rates are way up and I feel NO economic pain. My spending hasn't slowed one bit so far. Now, I wouldn't be excited to buy a new vehicle or a second home right now with rates where they are and I'll hold onto my current vehicles and house at least through these high rates so it's not that it hasn't had any impact on my purchasing decisions, just very little.

 

[Dave Hess]

Hopefully Fed keeps increasing rates….

 

[miden851]

just look at T10 that normally tied to the interest rates in mortgage industry;

you'll see that in the mid 2020 interest rates were hovering at 3% APR for 30Y mortgages or even less; nowadays they are a tick above 7%

I remember I was holding the mortgages papers for our member at 3% on 30y mortgage around that time; the dirt cheap money;

On the bright side, savers are rewarded with higher % in their savings accounts

 

[PWMDMD]

just look at T10 that normally tied to the interest rates in mortgage industry;

you'll see that in the mid 2020 interest rates were hovering at 3% APR for 30Y mortgages or even less; nowadays they are a tick above 7%
View attachment 143113

I remember I was holding the mortgages papers for our member at 3% on 30y mortgage around that time; the dirt cheap money;

On the bright side, savers are rewarded with higher % in their savings accounts

...and look at how inverted the treasury yield curve is now vs one year ago. That has historically been a very strong indicator that the poop is still going to hit the fan.

 

[atikovi]

Lovin it. All my bank savings accounts are paying well over 4% interest and one is over 5%. Got over $2,000 in interest the end of February compared to about $500 just a few months before. Just for keeping money in the bank. Heck, with enough money in the bank, people could just live off their interest. Whoda thunk.

 

[PWMDMD]

Lovin it. All my bank savings accounts are paying well over 4% interest and one is over 5%. Got over $2,000 in interest the end of February compared to about $500 just a few months before. Just for keeping money in the bank. Heck, with enough money in the bank, people could just live off their interest. Whoda thunk.

IF, you have the cash to put into the bank. Most people do not.

 

[atikovi]

Better than putting it in the stock market.

 

[miden851]

IF, you have the cash to put into the bank. Most people do not.

you'll start to see the same CC playing game just like prior 2008; borrowing at 2-3% and saving at 5% and more

 

[Snagglefoot]

Lovin it. All my bank savings accounts are paying well over 4% interest and one is over 5%. Got over $2,000 in interest the end of February compared to about $500 just a few months before. Just for keeping money in the bank. Heck, with enough money in the bank, people could just live off their interest. Whoda thunk.

Inflation is still putting you under water. A 5 % return when inflation is 6% is a -1% real return.

 

[PWMDMD]

Inflation is still putting you under water. A 5 % return when inflation is 6% is a -1% real return.

This month...who knows next month? Inflation seems to be trending down.

 

[atikovi]

Inflation is still putting you under water.

The published inflation rate is calculated from a mixed bag of commodities and doesn't effect people equally. The price of eggs went up big time recently. For those that buy many eggs, that component of inflation will put you under water. I don't buy eggs. Same for many other things I don't buy so that part of inflation won't affect me. In total, inflation has a minimal effect for me, plus one sale every few months gets me back to that 5% overall return.

 

[PWMDMD]

The published inflation rate is calculated from a mixed bag of commodities and doesn't effect people equally. The price of eggs went up big time recently. For those that buy many eggs, that component of inflation will put you under water. I don't buy eggs. Same for many other things I don't buy so that part of inflation won't affect me. In total, inflation has a minimal effect for me, plus one sale every few months gets me back to that 5% overall return.

Chickens...I wasn't a fan of my wife getting chickens but we eat a lot of eggs!

 

[atikovi]

Chickens...I wasn't a fan of my wife getting chickens but we eat a lot of eggs!

I don't eat eggs because I just don't like them. When cooked or scrambled they smell like unwashed feet. And consuming the unborn life form of an animal is gross.