Repossessed Homes At Deflated Prices

Many people’s mortgage terms are set to expire this year. These people will be placed in the unenviable position of having to take a gamble on which way interest rates are going to move, during a period of total uncertainty. Well, that is not true – we are not in a period of TOTAL uncertainty. In fact, most people will agree that the interest rates look likely to rise, rather than fall. The question is, to what extent will interest rates go up?

If they are likely to go up only by a small amount over the next few years, then it is probably in most people’s interests to go with a variable rate mortgage, because the rates will be lower. They will also be prone to fluctuation, but if people are absolutely convinced that the rates will not rise to drastic levels, then it makes sense to go with the variable rate mortgage.

If, states the bank foreclosed homes guide, we expect a drastic rate increase over the next few years – perhaps even to the levels of the 1980s, when interest rates hit twenty percent on a regular basis – then it is advisable to go with a fixed rate mortgage. A fixed rate mortgage will initially be more expensive, but is not prone to fluctuation – a surefire way to avoid the foreclosures and repossessions that marked the mortgage crisis.

This is a good thing, because when banks sold all these repossessed homes at deflated prices, it actually ended up worsening the problems for everyone, because prices ended tumbling as the market was flooded with cheaper and cheaper houses. The entire foreclosure process actually led to a vicious cycle of decreasing asset prices, and thus wiped out a lot of wealth that had taken many people years, and in some cases even decades, to create. The last thing we want is a repeat of this scenario – for this reason, if you are expecting a drastic rate hike, it is best to go with a fixed rate mortgage.

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