Interest Rates Have Nowhere to Go but Up

On Sunday April 11, 2010, 1:00 pm EDT

Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates.

That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession.

The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.

“Americans have assumed the roller coaster goes one way,” said Bill Gross, whose investment firm, Pimco, has taken part in a broad sell-off of government debt, which has pushed up interest rates. “It’s been a great thrill as rates descended, but now we face an extended climb.”

The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.

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Editor’s Note: If interest rates continue to go up this will continue to severely depress the real estate market. Either incomes will have to go up or homes will have to drop in value to compensate. We employ several strategies to buy properties without the worry of interest rates, lower home prices, and reduced equity. If you live in the Yelm Area Community including Rainier, Tenino, Bucoda, Roy, Mckenna, and Eatonville, then we may be able to help.

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