Now that I've locked into a low mortgage rate of 2.75 percent, I'm ready for interest rates to rise. I am ready to start getting a better return on my money. At the same time, I am concerned about my children's future since they may have to deal with dramatically higher interest rates when it's time for them to purchase homes. I am encouraging them to save money so they can purchase a home with cash if mortgage rates ever return to double digits.
According to a recent article by CNBC, some financial experts including George Soros believe interest rates will rise as soon as the economy gets going. I am skeptical that interest rates could stay low for much longer simply because our economy keeps shifting all the time. Low interest rates seem to be part of a larger economic cycle that is destined to evolve to a new cycle.
Depending less on risky investments
Some experts say baby boomers are forced to invest in the stock market because they can't get a return on their money in more conservative investments. If interest rates go back up, I may be able to find safer havens for my money as I get older. At this time, I am fine with having a large percentage of my portfolio on the stock market because I'm still 30 years away from retiring.
Saving money for my next car
Because I believe interest rates will rise on everything from mortgages to car loans, I'm trying to save enough money for our next car. We are putting $300 aside every month in addition to making our regular $300 a month car payment. Once our car is paid off, we can save $600 a month into a new car fund. I would like the option to pay cash for a car if interest rates go up.
Staying put in our home
I recently refinanced to a 15-year fixed rate mortgage at 2.75 percent because I am fairly confident that was the bottom. I hope to stay in my same home when I retire. Retiring in place is becoming more popular with the older generation. After locking in at such a lower interest rate, I don't want to move and have to take out a new loan. If interest rates rise, I think a lot of people will be more inclined to stay put rather than relocating, downsizing or up-sizing their homes.
Although I'm not an expert on the economy, I have a gut feeling that the spike in interest rates will signal the end of the bear market or down economy. I think higher interest rates will usher in a new economic period when the United States will see lower unemployment rates. Even if the housing values do not continue to recover, I think most people will have more home equity simply because they are either taking out shorter-term mortgages or paying down their mortgages. I'm looking forward to the next economic cycle of prosperity even if the next phase includes higher interest rates.
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