Saturday, April 22, 2017

Not according to sandbox

Here we have a Money Market post on adjustable rate mortgages.  The author says save the smaller interest charges because you need them for larger interest charges later. The author is implicitly comparing the adjustable rate to the 'safe rate'.

The sandbox has no safe rate, S&L technology has adjustable, asynchronous interest swaps, direct immediate and with prior warning. Users generally keep both a savings and loan balance on the even money bet. The purpose of these interest charges is to tell us exactly when to spend more or less, because real goods are the value the reason for money.
Getting an adjustable-rate mortgage can save homeowners money — but whether they actual put those funds to good use is another question.Homeowners whose mortgage payments dropped when their adjustable-rate mortgage (ARM) reset to a lower rate increased their spending, according to a report released this week from the JPMorgan Chase Institute. On average, these borrowers’ credit card spending went up 15% relative to their baseline, which equates to around $488 per month.Though mortgage rates have faltered in recent weeks, by and large they are way higher than a year ago thanks to the election of President Trump as markets priced in his supposedly favorable economic policies. As a result, some borrowers may be regretting their choice to spend what they saved thanks to lower rates rather than set it aside.

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