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Banks have already said that interest rates will go up if our credit rating goes down to AA.
Can't you read news reports?
Will interest rates on mortgages, car loans, student loans and credit cards rise?
Yes. Like any average Joe or Jane who misses a credit card payment, the U.S. will be socked with higher borrowing costs if it defaults on its debt. If the U.S. loses its coveted triple-A rating, which is expected, the cost to service its debt will rise. And that will have a significant ripple effect.
Greg McBride, senior financial analyst at Bankrate.com, says either a ratings downgrade or debt default would result in higher borrowing rates for consumers and businesses alike. “More of a concern is that a prolonged default could cause credit markets to freeze altogether, and we will have real problems,” he says.
It’s impossible to speculate how much rates will go up, he says. ”There are a lot of variables at play. The downgrade will lead to a more modest increase in rates. However, that increase would be permanent.” Folks who have variable debt such as a credit card balance or adjustable-rate mortgage can take a little comfort in this: “You are going to see higher interest rates eventually, anyway, because rates are so low,” McBride says.
Alas, consumers won’t see higher rates on saving products, such as certificates of deposit or money market accounts. “Those products won’t improve until loan demand picks up, any downgrade or default will only hold back loan demand,” McBride says.
Answers to the 7 big “what-ifs” of debt default | Reuters Money (http://blogs.reuters.com/reuters-money/2011/07/29/answers-to-the-7-big-what-ifs-of-debt-default/ - broken link)
Which is why my wife and I have been holding out to buy a home. When Mortgage rates increase, house prices will plummet BIG TIME and we will be able to pick up a home of our choice at much less than the low interest rate would offer us (I mean, have people actually did the math on how much money they pay in interest? Its absurd!). A 30, 15 year loan? Bleh, stack payments and pay it off in 3-5 years. That's the key!
Which is why my wife and I have been holding out to buy a home. When Mortgage rates increase, house prices will plummet BIG TIME and we will be able to pick up a home of our choice at much less than the low interest rate would offer us (I mean, have people actually did the math on how much money they pay in interest? Its absurd!). A 30, 15 year loan? Bleh, stack payments and pay it off in 3-5 years. That's the key!
Not necessarily true. Prices could fall, but if credit markets cease, no one can get a loan to buy anything, and banks will sit on homes that are foreclosed. Now sooner or later, markets will ease and the prices will fall, but if you are paying 25% interest on the loan, IF you can get a loan, it still isn't worth it.
If you don't have a credit rating of over 750 with 30% down, you probably wouldn't find financing.
The Democrat party refuses to spend only based on income. We are dying and the Democrats want to behave as usual.
Considering that fact, how is the USA a good investment?
Nothing new, its the pendulum swinging as it always has. The democrats are digging their ditch and their behavior in such poor economic times (as usual) will cause people to run from them.
The question is though, the republicans over time have been infiltrated by the left as well and we have to be careful that we do not end up with a wolf in sheep's clothing.
I would love a true independent to run, but honestly, I think it will take a major meltdown for it to even have a chance. Not a media perceived one, but one where every home is feeling the pain. I am unsure if this incident will be significant enough to be that driver.
does anyone actually think that U.S. Treasuries would be a riskier investment than AAA-rated mortgage backed securities were in 2007-2008?
I'm not asking if the default itself matters, I'm asking whether anyone thinks this "downgrade" will matter.
The downgrade from a major(s) credit rating agency is what I fear most. I know if we default, a deal would be made within days and everything would go back to normal. However, a downgrade from a major agency such as Moody's or S&P would have long lasting effects. I think this would be a huge milestone for another country to take over as the world leader in 50 years from now.
Not necessarily true. Prices could fall, but if credit markets cease, no one can get a loan to buy anything, and banks will sit on homes that are foreclosed. Now sooner or later, markets will ease and the prices will fall, but if you are paying 25% interest on the loan, IF you can get a loan, it still isn't worth it.
If you don't have a credit rating of over 750 with 30% down, you probably wouldn't find financing.
They have already been sitting on homes now (contrary to media propaganda, foreclosures are a major problem), if they choose to sit on them as interest rates rise, they would simply be complete idiots (to which even a greedy money hungry moron wouldn't deny)
Home prices are still in the "stupid" range. People won't be able to afford a real interest rate increase. Now keep in mind, I am talking about "REAL" increases, as in 1980+ levels. Few would even consider, much less afford the loans at 18% interest for the prices now. They WILL drop, this WILL happen. Take a look at the median income now, house prices, and the fact that if there is a major economic downturn... They will drop, they will drop Massively and the banks won't even be able to afford to sit on them. Not after a housing market boom. Its certain death for them if they do.
As for credit rating, 800+ no problem, 30% down, no problem... There is something to be said for being patient and prudent.
edit:
If you want to see what I mean, do a Google for Zillow Real estate. Use their map searching feature. Banks are hurting due to defaults, the market is ripe now, but like clubbing baby seals very soon.
Considering that fact, how is the USA a good investment?
because this is all a completely arbitrary political event, not a true default. it is a refusal of the US to to borrow, not a refusal of foreigners to lend.
because this is all a completely arbitrary political event, not a true default. it is a refusal of the US to to borrow, not a refusal of foreigners to lend.
If default happens, and the credit markets freeze, and the economy tanks, and unemployment goes up to 15% or higher, will you come back and say you were wrong with this statement?
If default happens, and the credit markets freeze, and the economy tanks, and unemployment goes up to 15% or higher, will you come back and say you were wrong with this statement?
If that happens, I doubt he will care, and from most posters on this board, likely even if it doesn't effect them, they will simply ignore that they even mentioned such.
So no, and no.
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