That 3% Mortgage Just Keeps Getting Better
As the Fed pushes interest rates higher, homeowners who secured ultra-cheap loans during the pandemic can invest in low-risk Treasuries that earn enough to significantly offset the cost of their homes.
Sitting pretty.
Photographer: Darryl Dyck/Bloomberg
The economy has been stronger and inflation stickier than markets and forecasters expected at the start of 2023, prompting traders to place bets that the Federal Reserve could ultimately raise rates as high as 6% — a level not seen since 2000. That would have big implications for the housing market and particularly for homeowners who locked in a low mortgage rate early in the pandemic.
We’ve already seen homeowners grow reluctant to sell their houses because it would mean giving up their cheap mortgages. Now ever-escalating short-term interest rates are going to make it possible for them to turn their financial position into the kind of carry trade that would be the envy of a bank or hedge fund.