Industrial Insight

No higher rates yet… | January 19, 2015

http://www.realclearmarkets.com/articles/2015/01/19/dont_count_on_higher_interest_rates_quite_yet_101493.html

January 19, 2015

Don’t Count On Higher Interest Rates Quite Yet

By Jeffrey Dorfman

When rates fall, borrowers refinance their mortgages and when rates rise, they hold onto their mortgages; thus, lenders know that when rates rise they risk being stuck for a long time with below-market returns. That gives them a powerful incentive to raise their rates before the Fed begins to move; yet, the data shows no sign on such a preemptive rise in mortgage rates.

Car loans and personal consumer loans also display a slow and steady downward trend in the average rates over the past year. Combined with the pattern of mortgage rates, the picture of rates in the marketplace seems clear. While all the experts expressing opinions (including those at the Fed who actually make the decision) are convinced that the Fed is about to start increasing interest rates, those who lend money do not seem to be acting as if they are worried about either a higher cost of funds or increased inflation. Lenders continue to be quite willing to lend money for rather long terms at historically very low rates.

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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