U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
 
Old 01-16-2015, 07:18 AM
 
Location: NC
6,583 posts, read 8,022,963 times
Reputation: 13524

Advertisements

All the news outlets are happy to report how low mortgage rates are running. 30-year below 3.66 and 15 year below 3%. Potential buyers are thrilled. Young people may be able to afford a house for the first time.

But are any other retirees bothered by this? For example, if I was 60 and planning to live another 30 yrs, would I loan the money to buy a house to someone at 3% interest? This is not a reasonable investment option, given all the risks of default and decay involved--is it? Likewise, these sorts of loans are related to my returns on my investments if you take the broad view. Does this mean that I should start to expect a major decline in the staying power of my retirement funds? Luckily these buyers will not keep their loans for the full 30-years, what with many homes being resold every 5 to 10 yrs, but are these low interest rates not hurting retirees? Please show me I am wrong (leaving politics out of the discussion).
Quick reply to this message

 
Old 01-16-2015, 07:25 AM
 
71,913 posts, read 71,971,035 times
Reputation: 49460
most of america has little savings and lots of debt so they benefit far more from lower rates than they would give up since many live hand to mouth basically.

retirees with money have seen huge increases in equities and bonds just because of these low rates.

the only ones who got hurt are the ones that did not listen to the fed who did everything but drop leaflets from helicopters saying do not invest in cash instruments you will get nothing.

if you chose not to listen and if you made the classic mistake of putting all your assets in one asset class as yes ,cash is an asset class. then you paid the price . you got hurt the same as any other investor who picks the wrong asset class at the wrong time.
Quick reply to this message
 
Old 01-16-2015, 07:29 AM
 
Location: NC
6,583 posts, read 8,022,963 times
Reputation: 13524
So mathjak107, are you basically saying that it is a good thing for retirees as long as they have their retirement funds generally in equities and bonds? That it is these low rates that are helping the stock market, so to speak? That would be nice.
Quick reply to this message
 
Old 01-16-2015, 07:42 AM
 
71,913 posts, read 71,971,035 times
Reputation: 49460
yep, unless a retiree is at opposite ends of the spectrum ,either no descretionary money at all or very wealthy the smart thing to do is have a mix of equities, bonds ,cash and whatever else you like.

the worst thing you can do is bet the ranch one one asset class.

this is not the first time interest rates went negative as far as real return.

higher rates go hand in hand with higher inflation. getting more interest and still turning close to zero real return after taxes and inflation is no investment.

in the mean time folks who refinanced , bought homes and got mortgages , bought cars or leased all got a windfall savings from these low rates.

figure out what the average american savings is in cash and what the average debt is and see which benefits more.

in fact many folks have jobs because the low cost of financing and money to businesses are low allowing more to be spent on other resources.

for a country who's gdp is 70% based on consumer spending we are holding up well and spending has been fine.
Quick reply to this message
 
Old 01-16-2015, 07:56 AM
 
Location: Loudon, TN
5,817 posts, read 4,862,439 times
Reputation: 19538
For those of us retirees with mortgages, it's definitely in our best "interest". I would rather pay off my principal than give my money to pay high interest to some mortgage company. I also have more money for other purposes, since my house payment is affordable. We long ago refinanced our rental property, and with lower payments we paid down principal and paid that off, improving our cash flow. It's also made the potential of buying another rental possibility, which can increase our cash flow further.

Last edited by TheShadow; 01-16-2015 at 08:19 AM..
Quick reply to this message
 
Old 01-16-2015, 08:29 AM
 
Location: NC
6,583 posts, read 8,022,963 times
Reputation: 13524
One reason for my question TheShadow was that so many retirees have worked arduously to pay off their mortgages. So the low interest rate has no direct value to them at all.
Quick reply to this message
 
Old 01-16-2015, 08:32 AM
 
71,913 posts, read 71,971,035 times
Reputation: 49460
low rates are tied to everything we do and buy including real estate taxes. financing is all built in to the price.
Quick reply to this message
 
Old 01-16-2015, 08:44 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
29,895 posts, read 54,615,351 times
Reputation: 31285
I would consider low interest rates to be a benefit for the "soon-to-retire". It means better chances of selling their home at a good price when they downsize/relocate. While ours will not be paid off, we have enough equity now to pay cash for the retirement home in a few years. With high interest rates the value will level off or decrease as demand is reduced from fewer buyers able to afford the mortgage payments.
Quick reply to this message
 
Old 01-16-2015, 09:20 AM
 
Location: Sacramento
13,784 posts, read 23,829,969 times
Reputation: 6195
Quote:
Originally Posted by luv4horses View Post
One reason for my question TheShadow was that so many retirees have worked arduously to pay off their mortgages. So the low interest rate has no direct value to them at all.
Depends upon their own financial situation. After all, they can borrow against the asset with the low interest rates too.
Quick reply to this message
 
Old 01-16-2015, 10:12 AM
 
71,913 posts, read 71,971,035 times
Reputation: 49460
Quote:
Originally Posted by Hemlock140 View Post
I would consider low interest rates to be a benefit for the "soon-to-retire". It means better chances of selling their home at a good price when they downsize/relocate. While ours will not be paid off, we have enough equity now to pay cash for the retirement home in a few years. With high interest rates the value will level off or decrease as demand is reduced from fewer buyers able to afford the mortgage payments.
that is not true about higher mortgage rates decreasing values.

in fact just the opposite . rates increase because the economy is humming , people are working and spending.

our best appreciation has been in the 6-7% mortgage range historically.

if it was only about rates prices should be at the highest levels ever.

usually as mortgage rates rise it puts more pressure on buying now before we can afford even less house and that is good for prices.

until rates become very high there is not a lot of historical links between JUST RATES and appreciation.
'
Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


 
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:
Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top