Is it really high by historical standards? My parents rate was over 15%.
Also, if you had extra money laying around would you want to loan it out at 2-3%? I think 5-9% seems more reasonable rate of return for taking some risk etc. I don't understand why anyone would want to loan out for the low rates that we have been loaning money out at over the past 15 years.
onlyrealcuzzo•7mo ago
Nobody "lent" money to normal people at prime rates.
Almost the only people buying Treasuries are:
1) The Fed (to manipulate prices)
2) Foreign governments (because they basically have to for international trade to function)
3) Pension funds (because they are literally mandated by federal governments)
4) bond traders (who don't think the yield is an investment, but that they know where the price is headed and can make money selling at a better price in the near future)
5) 401k funds - of which US Treasures are typically a very small percentage, given that "bonds" as an entire asset class rarely exceeds 40%.
daft_pink•7mo ago
I beg to differ on the normal people at prime rates. There are definitely many many people who got mortgages at 2.65% for 30 years and many many people who received auto loans at 2-3% from a lender unsubsidized from the manufacturer.
I think it's totally insane from a lender point of view to lock yourself in for 30 years at 2.65% and makes very little sense.
cosmotic•7mo ago
What were the housing prices like when they had that 15% mortgage?
People loan money out at lower interest rates for homes because it's low risk because of the colateral of the house.
daft_pink•7mo ago
Fair. Obviously as interest rates increase, housing values decrease, but I do think that the near zero percent interest rate environment that was created after 2008 made little to no logical sense, that the current rates are normal and we shouldn't expect a return to near zero any time soon.
I think there is a lot of agreement from the financial world on this point. If any correction is going to occur, it's going to be in the asset values themselves or through inflation or stagnation over time.
daft_pink•7mo ago
Also, if you had extra money laying around would you want to loan it out at 2-3%? I think 5-9% seems more reasonable rate of return for taking some risk etc. I don't understand why anyone would want to loan out for the low rates that we have been loaning money out at over the past 15 years.
onlyrealcuzzo•7mo ago
Almost the only people buying Treasuries are:
1) The Fed (to manipulate prices)
2) Foreign governments (because they basically have to for international trade to function)
3) Pension funds (because they are literally mandated by federal governments)
4) bond traders (who don't think the yield is an investment, but that they know where the price is headed and can make money selling at a better price in the near future)
5) 401k funds - of which US Treasures are typically a very small percentage, given that "bonds" as an entire asset class rarely exceeds 40%.
daft_pink•7mo ago
I think it's totally insane from a lender point of view to lock yourself in for 30 years at 2.65% and makes very little sense.
cosmotic•7mo ago
People loan money out at lower interest rates for homes because it's low risk because of the colateral of the house.
daft_pink•7mo ago
I think there is a lot of agreement from the financial world on this point. If any correction is going to occur, it's going to be in the asset values themselves or through inflation or stagnation over time.