When Inflation Causes Mortgage Rates To Spike…
I couldn’t help but correlate what I recently read over on ZeroHedge to the reality that many people are ‘on the edge’ (paycheck to paycheck) with being able to pay their mortgage (“Mortgage Delinquencies Rise Most In 7 Years As Rates Spike”), indicative of the fragility that exists within the structure of our debt burgeoned system and society.
Evidently 30-year mortgage rates have increased from about 3.6% to around 4.4% during the past four months (inflation is coming) and the affects of corresponding higher mortgage payments (for some types of mortgages) have caused a sudden rise in delinquencies.
This is an indication of two things…
1. Inflation is coming (here?) 0.8% mortgage rate increase in four months.
2. Just how tight people’s budgets are – with literally zero wiggle room – such that they cannot afford to pay the uptick in mortgage payment. There’s no margin.
It is also indicative of the apparent fact that so many people buy a house that is right up to the maximum amount they can barely afford. And then (depending on their mortgage) when the payment creeps up, they’re screwed…
Additionally, even many of those who have not taken on a mortgage that may go up when interest rates go up, so many of these people still buy the house that’s right up to their max.
This is true in other areas as well. Loans for new cars. Loans for new furniture. Loans for credit cards. Very few people seem to live below their means such that there is excess income to set aside for ‘just in case’.
This tells us that WHEN the system takes a nose dive, there will be MANY people who will be negatively affected and will be up the creek without a paddle, so to speak.
Because there are SO MANY PEOPLE in this predicament, if and when the Swan Dive comes along (Belly Flop), you and I who perhaps have better prepared for this, will very likely be affected – perhaps in ways that are yet unforeseen.
I strongly believe that inflation is going to rear its head, and perhaps in a very big way. I do not know when (we are seeing hints of it now). The powers-that-be may not be able to contain the tiger, and if it gets out of the cage, watch out…
There will be enormous ramifications across the planet. Why? Because the planet is in debt WAY OVER ITS EYEBALLS and if their ‘payments’ go up (because of inflation), there WILL be defaults. And then the house of cards begins to fall as the ENORMOUS derivatives chain begins to snap its links.
It’s all tied together folks, and it’s going to affect us all.
Hey, for all I know maybe the stock market will roar to 30,000 and I will be the one who misses yet another big run-up. Whatever… But my gut just tells me that this is insane and I just cannot get myself to enter that casino.
Instead, I’ll continue to diversify. I’m feeling like some more silver may be a good thing 😉