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Average Mortgage Rates – How Will Inflation Affect Interest Rates?

Posted on | July 7, 2009 | 3 Comments

Please use Subprime Blogger to keep up with current mortgage rate trends.  We also offer advice to get the lowest Chase mortgage rates possible.

Average mortgage rates have been at historical lows for quite some time now as the government has attempted to put a cap on treasury rates.  Unfortunately, they cannot cap the 10 year treasury rate forever and when the government runs out of ways to push interest rates lower, it is likely we are going to see a sling shot effect.  There is little doubt that we are going to see inflation rear its ugly head in the next few years.  The Federal Reserve Bank has been printing money at will and the value of the dollar is likely to decrease greatly.

With this bit of knowledge we must decipher what inflation will do to average mortgage rates.  Throughout the history of the United States, we have seen that inflation causes much higher mortgage rates.  If we look at the most recent inflationary period, the 1970s and early 1980s, we see that inflation was running rampant.  The price of commodities skyrocketed and the 10 year treasury rate reached 15% at the peak in 1982.  If you were alive, you remember daily mortgage rates around 17% during this time; very bad news for the future of mortgage rates in today’s economy.

No one knows if inflation will be nearly as bad as it was in the 1970s and 1980s but one thing is for certain – we have never seen this type of government debt in the history of our country.  The problem is that Ben Bernanke thinks he can print his way out of this recession.  Basic supply and demand shows that the more you have of a good or service, the less it is going to be worth.  If Bernanke continues to print billions of dollars to buy back mortgage backed securities and assist in other stimulus programs, the value of the dollar WILL fall.

If you feel that inflation is going to show itself in the next few years, make sure to put your money in inflation investments.  There are no better investments during inflationary periods than commodities.  If you do some research on how commodities traded during the last period of inflation, you will see tremedous gains.  Once again, we have no idea how bad inflation is going to be, but we are definitely going to see it in the near future.

Category: 10 year treasury rate, Inflation Investments, average mortgage rates
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Comments

3 Responses to “Average Mortgage Rates – How Will Inflation Affect Interest Rates?”

  1. Subprime Blogger / Average Mortgage Rates Going Higher in June
    July 7th, 2009 @ 6:59 am

    [...] July 7th – The most up to date average mortgage rates article is available at this link: Average Mortgage Rates – How Will Inflation Affect Interest Rates? If you think inflation is likely to happen in the next few years, this article will hit home.  [...]

  2. Subprime Blogger / 15 Year Mortgage Rates Inch Above 4.75%
    July 16th, 2009 @ 9:16 am

    [...] morning for the first time in two weeks.  While this may not seem like a big deal, the movement of average mortgage rates is starting to get disheartening to current home owners looking to refinance.  The government has [...]

  3. The Financial Suite » 15 Year Mortgage Rates Inch Above 4.75%
    July 16th, 2009 @ 5:12 pm

    [...] morning for the first time in two weeks.  While this may not seem like a big deal, the movement of average mortgage rates is starting to get disheartening to current home owners looking to refinance.  The government has [...]

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