Will interest rates drop in the next 5 years?

Question

My broker wants to go with a 5 year adjustable rate with the expectation the interest rates will drop in 5 years.

Answer 1

Mortgage rates have been slowly ebbing upwards for the past 2 years or so. It's not possible to say with any certainty where they will be in 5 years. So many things can happen in 5 years that could affect internest rates that any prediciton is pure voodoo.

Your broker is probably pushing the adjustable rate product as it results in more profit for him, not because it's a better deal for you!

Given that rates are climbing right now, most independant finalcial planners would recommend that you go with a fixed rate mortgage unless you know for certain that you will sell the property before the rate lock on the adjustable mortgage expires.

Fixed rate mortgages are still a bargain considering where rates have been over the past 20 years and the spread between fixed and adjustable just isn't very much at all. You might save a few $$$ today but get hit with breathtaking payment increases down the road when the rate lock expires.

Answer 2

Well a lot of the " experts " predict that by - summer 07 -

Interest rates, will gradually be reduced ,

Sounds like an educated guess, to me.

Thats is if you believe that the bursting of the " Housing bubble " and worries of a coming "recession" ..in the U.S. etc

Answer 3

interest rates will likely stay relatively stable within the next five years, give or take 4 % up or down

The reason interest rates spiked in the eighties was because all of the baby boomers wanted cash to buy houses, supply and demand deems that when demand goes up and supply goes down, price (or in this case interest rate) goes up.

Since baby boomers are not likely going to need to borrow money at the same rate as when they were all buying their first houses, there will not likely be another interest rate hike for a long time to come.

As a matter of fact, in the immediate short term, theoretically we should see a decline in interest rate due to the slowing down of housing sales, again supply and demand, since housing sales are down, demand for mortgages is down, giving banks a glut in supply of money, causing them to drop interest rates to entice people to borrow money for whatever.

Answer 4

In America now they are going skyward, because of the inflation, they have went from interest bearing accounts from 1.5% up to over 6% and still climbing, killing the housing market, but 5 years only someone with a crystal ball could tell you that, but in the next few it is up and up!

Answer 5

My crystal ball says no

Answer 6

sophisticated matter. look over a search engine. just that may help!