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Profile picture for SoCal Engr

Is there a theoretical bottom to how low rates can go?

Manufactoring and retail have a theoretical bottom, based on cost to make/deliver a product. Any similar "bottom line" to mortgage rates?
  • August 11 2011 - Black Mountain Ranch
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Answers (5)

Profile picture for Blue Nile
By the way, I have seen 3% 30 year fixed rate mortgages, but all the ones at that rate that I've seen recently were government subsidized.  They also sometimes used their government leverage and AAA+ credit ratings to sell tax exempt bonds to fund these abnormally low rates.

Some of them even required no payment at all until after the owner's death.
  • August 11 2011
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Profile picture for Blue Nile
Thank you!

And since any industry can improve efficiencies with invocation, and the Federal Reserve is happy to loan out money to banks at 0% interest... then that means that I should eventually be able to borrow at 0% interest too!

(Actually, I do, since the credit cards charge the vendors 3% for the transaction, and the card companies want "new customers" with good payment history, they continue to give away accounts with 0% interest for 12 to 18 months.  So, after the "0% interest" starts running out, I just pay off that card, open a new card, and start using someone elses' money for free).  Still, you know they are passing those costs on to other customers.  But at least I don't have to pay them.  And the vendors are giving extremely competitive prices for what I'm buying, so I wouldn't save any money by not using the cards.  I just hope I don't put those business out of business by making them pay 3% on my purchases for nothing.

(By the way, last time I used one of those hats, I ended up 2 feet off of the ground) ;-)
  • August 11 2011
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Pasa, whenever your birthday is, please accept this as my token gift.

  • August 11 2011
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Profile picture for Blue Nile
I had posted this:

"The "constraints" are that bonds don't typically return a negative amount, and there is "overhead" and "risk" to be factored into each loan type and processing.Thus if 2 year T-Bills are returning 0%, and 3 year a nominal amount over that, and 5 year a nominal amount over that, and 7 year a nominal amount over that, and 10 year a nominal amount over that, and 30 year a nominal amount over that...And MBS having to be reasonably competitive with T-Bills as an "investment" vehicle, but T-Bill returns being tax exempt when proceeds from MBS is not; the MBS will typically return higher than the 10 yr T-Bill.And comparing the 5/1 ARM, 7/1 ARM, 10 yr fixed, 15 yr fixed, and 30 yr fixed, first it is obvious that the 5/1 ARM will never be a negative percentage, nor even 0% as there is "overhead" for administering the loan, and a 30 yr must cost more than the others due to the longer time span and risk of unknown rates that far out.Sure, the spread between these is not fixed.  But it appears that puts the absolute floor for the 30 yr fixed at about 3.0%.  But for it to get there, the stock market would really have to crash to make the desire for very low yield bonds much much higher.
"

On this thread:
  • August 11 2011
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Profile picture for Blue Nile
I thought I already answered that on one of your other threads...

I'll look for the answer and reference it.
  • August 11 2011
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