Never a borrower, or a lender be

One of the most common questions I get from friends, neighbors and clients is when do I think interest rates are going to come down. Most know that higher mortgage interest rates can often depress home prices while lower interest rates give buyers more borrowing power thus supporting, and even increasing home prices.

I would love to tell my friends and neighbors that I think all is well and we’ll be seeing 4 or even 5 percent mortgages again before too long, but that would be a lie. In reality, I think there’s a really good chance interest rates on home mortgages stay very sticky and if they do move a lot, it just may be HIGHER!

Most of you are too young to remember the late 70’s, but mortgage rates went as high as 18+ percent. So yes, it can happen and it has happened. It does usually take something extraordinary, and in that case it was runaway inflation. Now I’m hopeful that we’ll never get to that point again, but let me tell you why interest rates are not going down too much certainly in 2025/2026.

Uncle Sam is broke. How broke? 32 trillion broke and we add another trillion about every 100 days. Just to give you the scope of that, the USA only takes in about 5 trillion/yr TOTAL in income taxes. And don’t get me started on unfunded entitlements like social security, Medicare, Medicaid, Federal pensions, etc. They add another estimated 100 Trillion that are not in the above numbers.

I’m going to tell you something that our politicians are incapable of telling us. We can never repay this debt. Never

We have two choices

Default – never going to happen

Inflate – Oh yeah, we definitely know how to do that.

Lets be honest, inflation is a form of theft. It erodes our buying power, and decimates people on fixed incomes. It is especially hard on lower and middle earners that typically do not own assets that keep pace with inflation.

So what’s inflation have to do with mortgage rates you might ask? Everything. You see mortgage rates are largely determined by the 10Y Treasury. Basically, if a bank or Financial Institution (or another country) buys our 10Y Treasury, they are lending the USA money for 10 years. This year, around 6 Trillion of our debt matures, and must be re-borrowed. Now, let me ask you…

If you had to lend money to someone who was as broke as we are, and not get paid back for ten years, would you want a higher rate of interest to do it? You bet you would, assuming you would even lend it at all!! So the 10Y, and thus mortgage rates, ain’t going down much in 2025/2026 and if they do, then that’s really bad……I’ll explain that nightmare scenario in a future blog.

Thoughts, questions and feedback are always welcome.

Until next time,

Sal Busacca
Realtor
Keller Williams Greenville Central and
Dunrovin Properties SC
Mail: bettercallsal@kw.com
Website: www.dunrovinpropertiessc.com
Phone: 864 952-7251