(Originally published July 4, 2010.)
On June 18th , The Wall Street Journal published an article written by Alan Greenspan, entitled, U.S. Debt and the Greece Analogy. Don’t be fooled by today’s low interest rates. The Government could very quickly discover the limits of its borrowing capacity.
In the article, Greenspan said low interest rates give the misleading perception that the U.S. has a large capacity to borrow. “The present low inflation and low rate environment has fostered a sense of complacency that can have dire consequences. (i.e. – The Greece analogy.)” He continues that only politically toxic budget cuts and/or significant inflation – meaning higher interest rates – can close the deficit. (He added that tax increases would only sap economic growth.)
Greenspan predicts, “Low long-term interest rates could continue for months, or even well into next year. But just as easily, long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose by almost four percentage points.”
Mr. Greenspan’s sobering comments should not be taken lightly. The bottom line is that there are no fundamental reasons why mortgage rates should remain as low as they are. A “perfect storm” of factors has come together making for an incredibly low rate opportunity. But it won’t last long and can change very quickly.
If refinancing is on your mind, CONTACT ME NOW to determine if it makes fiscal sense. And if you’re thinking of buying a home, I can’t imagine the opportunities being better than now. Call me to review your qualifications and obtain a referral to a superior realtor who can make it happen for you.
Since 1992, Warren Goldberg has helped thousands of clients own their homes, refinance their mortgages, restructure their debts, and invest in real estate. Warren is known for his wide knowledge of mortgage products and wealth-creation strategies.