I was meeting with a banker today opening a new Estate Administration account. He said something which has me thinking….
It’s his prediction that now is the time for people to refinance with fixed rates at their lowest, with rates about to dramatically climb in two months or so.
Why?
He suggests that when the stimulus payments begin to hit the economy, all sorts of prices will rise. For example, when lots of money is spent on infrastructure, the demand for concrete will rise, and so will the price. He thinks that the banks will have to offer higher rates on savings to compete with other banks, since there will be more money in circulation, and that these higher rates will translate into higher costs to borrow.
This certainly goes against the thinking of President Obama’s mortgage rescue plan. One of the highlights of the proposal is to try and drive mortgage rates lower, in order to keep payments lower. See “The White House Announcement” tab above for the executive summary of the President’s plan.
This guy is not only a banker, but is an attorney and graduate of Wharton. He works at one of the largest banks in the country, one considered not to be in trouble. From what I know, he is a conservative lender, not a “go-go” type.
- 30 year Fixed Rates (bankrate.com)
My guess: rates will not be dramatically higher in two months.
This could change if Mrs. Clinton is unable to convince the Chinese to continue to be our biggest lender through their purchases of our Treasury Bonds. If that happens look for pressure to raise rates to in order to make our debt more attractive.
Would that be Chinese Food for thought?
Lee M. Herman, Esquire, is a creditors rights attorney with offices in New Jersey and Pennsylvania. His website is www.lmhlaw.com. He can be reached at (610) 891-6500 or by email at lherman@lmhlaw.com
