The Interest in Interest

I don't remember ever seeing this level of interest in... well... interest! Interest rates, that is.

Mr. Greenspan, our beloved Fed Chairman, continues to say good things about the economy, bad things about inflation, and rising things about interest rates. For those of us who are in the market to renew our mortgages, this could be construed as a bad thing overall. After all, we don't want to pay higher interest on our mortgages!

But we have to keep this in perspective. Interest rates continue to be at very competitive rates, if not historic lows. We are all getting a good deal (generally) for our interest buck. Further, while some economists are predicting gloom and doom regarding housing prices, Mr. Greenspan is saying that while housing prices may decline in areas of the country, such a fall won't derail our strong economy. It may take a bit of a bite out of your equity, in other words, but shouldn't put you out of a job because of bad vibes in the market.

Which puts me back to thinking on my favorite topic these days: How will I get the best deal on my (soon-to-be) renewing mortgage? Although interest rates are rising, are they going to stay up there? And if they do, will I do better to lock in now, or to take a variable mortgage which will climb, but give me more money in my pocket up front?

Personally, I'm leaning strongly towards a variable interest rate mortgage. The rates on these kinds of mortgages are still lower than any locked-in rate, and my mortgage is going to be biggest at the beginning. If I can save money now, it saves me more than if I end up saving money later, when the balance of my mortgage is lower.

Somehow (call me a gambling type) I don't think that interest rates are going to go that high, nor do I think they are going to stay up there. Our central banking system keeps a very close eye on interest rates, and we've learned alot from the excesses of the 80's. (If you weren't there when there were double-digit interest rates on mortgages, consider yourself very lucky.)

In the meantime, I'm going to dream about new houses and all the house-shopping we'll be doing -- AFTER the baby is born.

Michael

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