Extreme Interest Rate Hikes: How High Can They Go?
We could be in for far higher interest rates than most are expecting. Just how high might they go? What will it mean for real estate investors?
High Rates For Solving Inflation
It is being posed that we need extreme interest rate hikes to take the bite out of inflation.
To really make a dent, or halt inflation, financial experts and experienced CEOs say that interest rates need to be raised to at least the same rate as inflation.
This would make it more expensive to borrow for most things, and may cool consumer spending. Of course, it can have the opposite of the desired effect too. Simply making things more expensive and driving up inflation to breaking point.
Some may argue that the current hyperinflation economy has been purposely created and manipulated. It may not be based on real fundamentals. Either way, the Fed seems to be planning for rate hikes.
To match current inflation, rates would have to go up to at least the official rate of inflation which is approaching 9%.
If you look at your own expenses, you also know that you are actually paying 30-100% more for many things.
Are Rates That High Really Possible?
Many investors and homeowners have never seen rates that high. They probably think it is crazy talk.
However, looking at the facts, we see that it has happened before. The Fed has jacked up their rates to over 22% in the past. Average mortgage interest rates have been over 16%. That’s a whole world of difference from the 2% rates some saw advertised last year.
What Big Rate Hikes Mean For Real Estate Investors
One of the first things to watch out for is obviously any floating and adjustable rate debt you may be holding. Otherwise the payments on that debt could theoretically soar by 8-10x what they are now.
This will also clearly throw millions into bankruptcy. Or at least mean they can no longer afford their bills and housing.
This will bring many opportunities to help owners get out of debt, and to buy their properties from them. Start marketing to them based on leading indicators of potential distress. Like large amounts of revolving debt, ARM mortgages, and missed payments.
Using low rate transactional funding investors can take advantage of these opportunities at scale, do some good, and grow their own finances.
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