Quote:
Originally Posted by Azure
The other thing that boggles my mind, and this is really about grade 11 economics.
We had a red hot housing market before COVID.
Then COVID hit and the government had to spend a bunch of money to keep things going.
Grade 11 economics would probably tell you that about 1-2 years after that money is spent and the purse strings tighten up, we are likely due for major inflation. Which would equal interest rate increases.
Therefore it would make prudent sense around July of 2021 to think about going fixed rate.
I personally know people as well that had the ABILITY to go fixed rate 3%, went variable instead, didn't bother paying attention, and are now paying variable 5%+.
Crazy.
|
Not necessarily. There was just as much money injected into the system in 2007-2009 and there was virtually no inflation (in fact they were worried about deflation for a while). Current inflation likely has more to do with the recovery happening too quickly, to the point where shuttered production capacity and supply chains weren't able to catch up to the demand that returned so quickly. It has taken 4-6 years for jobs to recover to their pre-recession levels in the prior 2 recessions, but it happened within 2 years of COVID's recession.
Going fixed in 2021 made sense because the floor for variable rates was barely below what was being offered, so there wasn't a whole lot of upside in return for the risk of a rate increase. Because there was virtualy zero chance of variable rates dropping, effectively you could trade a ~0.5% higher rate (which represents a 4-5% increase in payments) for a guarantee of low rates for 5 years. That's very cheap insurance.