Interest rate predictions?

[Anonymous]

We are about to tap into a home equity line and the interest rate is tied to the prime rate, of course. It will likely take us ten years to pay this off so we're not completely comfortable leaving our future interest rate completely up in the air. We have the option to convert to a fixed rate that would be about 3/4 % higher than the current adjustable rate.

Any thoughts? Anyone care to predict how long we think the prime rate will stay the same or how quickly it will rise?

[Anonymous]

I am also interested. One new development is that the global economy may be slowing again so rates may not jump.

[Anonymous]

I think it's a crapshoot. That said, three quarters of a point is a lot.

[Anonymous]

plus your interest expense will be higher in earlier years (when the rate will presumably be lower)

[Anonymous]

Anonymous wrote:plus your interest expense will be higher in earlier years (when the rate will presumably be lower)

I know. This is the thing that's making me hesitate. Then again, when I see what prime was prior to 2008, I really wouldn't want to have that rate 3,4, or more years from now.

[Anonymous]

Our HELOC is tied to the 1yr. LIBOR and we have been very lucky and happy as the rate has decreased each year since we've had it....and it seems that Libor will decrease even further this year.

In general, I think most rates will hold steady for this year. The fed has already started pulling back with regards to quantitative easing and we see what THAT did to the market so far this year. It was necessary and inevitable but I'm not sure that it would be smart to raise rates on top of everything else. I think it would really hurt the economy. but I am NO economist. just a gal with a HELOC.

[Anonymous]

Yeah, seeking advice on interest rates from a bunch of anonymous posters on DCUM seems like a real savvy plan....Why not go ask the monkeys at the zoo?

[Anonymous]

I get some good nuggets of info from DCUM-ers. Don't knock it!

[Anonymous]

Anonymous wrote:Yeah, seeking advice on interest rates from a bunch of anonymous posters on DCUM seems like a real savvy plan....Why not go ask the monkeys at the zoo?

They both probably have as much chance as being right as "experts". Saw a study recently that said that financial "experts" are right 47% of the time when predicting whether the stock market will go up or down. That is worse than a coin flip, but not sure if they surveyed any monkeys as an alternative.

[Anonymous]

I model LIBOR predictions for a living. Our models suggest primarily flat to modest increases until 2016, but increasing likelihood of sharper increases by 2018.

Its hardly a super accurate science, but for what its worth, my bank is offering me the option to lock my rate in exchange for 25 bps, and I'm taking it.