Friday, December 26, 2008

Get ready to refinance your mortgage?

Krugman points out that there are relatively easy and benign ways for the treastury to lower mortgage interest rates. They are currently anomalously high compared to treasury interest rates (less than 0% currently).

For many people the safest investment these days is accelerating mortgage payments. Alas, that doesn't provide a lot of economic oomph; it's one of the reasons tax cuts don't yield much stimulus. People just use the tax cut to pay down their mortgages. That's what we'd do.

On the other hand, if we are able to refinance at a significantly lower rate, we have less incentive to pay down our mortgage and we have more cash to spend or invest. (It has to be pretty damned low though, our current rates are pretty low already.)

So this sounds like something an Obama administration might push. I'll watch for a refinancing opportunity come February.

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