Episode Transcript
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Speaker 1 (00:00):
Good to have Aaron Rayale back with US twenty four
to seven News National correspondent, Aaron, good.
Speaker 2 (00:06):
Morning, Good morning to you.
Speaker 1 (00:08):
How are you well o Hawaii? A fine?
Speaker 2 (00:10):
How you doing very good? No complaints?
Speaker 1 (00:13):
Good. We have been talking a lot about interest rates
with the Fed apparently about to announce a rate cut,
and maybe that's the first of a couple. And we
had our official economist, Ernie goss On here last week
and I asked him if that will trigger a domino
effect and we'll see lower mortgage interest rates significantly. He
(00:35):
doesn't think so. And there's now a thought that they
may be gone for good, the really.
Speaker 2 (00:40):
Low rates, right, yep, that's very possible. Now forever is
a long time, but the foreseeable future. Yeah, likely. And
that is because Set officials said that as in June,
they anticipated that their target interest rate would be two
point eight percent in the longer run. That's higher than
at any time in two thousand nine to twenty twenty one.
(01:02):
So to give you some context, the Fed funds rate
that that target rate today is five point three percent.
It's been floating around like five and a quarter to
five and a half percent. Then you have the prime
rate which is the rate that banks then lend out
to credit worthy individuals corporations like that. The good rate
that the rate you want, and that's generally three percent
higher than what the target rate is. The target rate
(01:24):
again five and a quarter roughly three percent on top
of it, right now, the prime rate is like eight
and a half percent roughly. So if they are going
to have their target rate at two point eight percent,
add three to that, that's generally like the best rate
you can look at.
Speaker 1 (01:41):
Wow, I mean we look at we look at the
twenty tens Aaron, and it was I mean, it was
just sensational.
Speaker 2 (01:48):
It's sensational, like anyone who has a three percent mortgage
right now? Well done, congratulations, that's exciting.
Speaker 1 (01:55):
A lot of people are hanging on to them.
Speaker 3 (01:57):
Two point seven five percent over here.
Speaker 2 (02:00):
Baby, wow, congrats, that is a victory.
Speaker 1 (02:04):
Yeah, mine's I think three point sixty five, which is
still that's not bad.
Speaker 2 (02:08):
Yeah, also great. Yeah, you know when people are looking
are like, oh, I'm going to buy the house with
a six point two percent mortgage, you know that that's
and they're excited about it. Yes, you're through something. It
looks awesome. But the point that I think is really
important to make here is that this is all due
to this new economic era. It's very unclear what comes next.
(02:30):
And the reason this economic cycle is unlike any in
modern history is this unique dynamic of post pandemic economic issues.
You had supply chain disruptions during the pandemic, you had
labor shortages, and then you had a massive physical support
So it broke all the rules of how monetary policy
usually functions and is what needs to be done, and
(02:52):
now we're experiencing what the other side of that looks like.
Speaker 1 (02:56):
Yeah, I got an email hear from Gregor's in business
a long time. He said, He said, in my career,
mortgage rates ranged from eighteen percent that sounds pretty high
on ow to two point two five percent during the
early eighties. I learned that rates had a similar range
over the one hundred preceding years or years preceding nineteen eighty.
Speaker 2 (03:21):
Yes, true, and a lot of people would be like,
I used to pay nine percent and be grateful. So sure, yes,
but the price of the house it was so different.
Year when the house was I don't know, eighty thousand dollars,
you were seven percent interest rate. Wasn't that hard to swallow,
you know, like it's just different if you're looking. I
(03:42):
believe the average house in the US right now is
something like four hundred and forty thousand dollars add ten percent. No,
people can't afford that. And then beyond that, there's this
massive housing shortage, So contending with that on top of
the fact that you probably couldn't afford it to begin with,
and then whoever can afford it, they're going to bid
up the price. Like everyone's like, oh fun, So the
(04:02):
interest rates are going to come down now we can
re enter the housing market. I don't spect that's going
to happen. I don't that's is dropping really quick.
Speaker 1 (04:09):
And then insurance insurance is out of sight.
Speaker 3 (04:11):
Well, property taxes and utilities it's keeping people from owning
a house. The mortgage is one thing, but it's the
property taxes, the utilities, and the insurance that's what's keeping
people from owning a house. And nobody seems to want
to talk to the other guy who's responsible for that. Okay,
so the property tax person doesn't care about your insurance
bill or doesn't care about your mortgage. The banker guy
(04:34):
didn't care about your property taxes. Here your insurance. Nobody
seems to care about the other guy that's keeping me
from buying or upgrade.
Speaker 1 (04:43):
Yeah, and it's kind of a it's kind of a
critical thing for our economy, for our culture. Really. I
go back to when I was very young, the first
house I ever bought. Interest rates were extremely high, but
there was a brief dip and this was in the
late I think nineteen seventy eight. There was briefly a
dip area and that's when we were able to buy one. Well,
(05:05):
if that doesn't ever happen, a lot of these young
families are going to be shut out forever. Well, I
hope forever. It's not not the case.
Speaker 2 (05:13):
Forever's a long time, and we don't know what the
future holds. And you don't want you don't want a recession,
and you certainly don't want deflation. But again, we don't
know what the future holds. They're sore like this is
why economics is interesting and also a head scratcher because
it's it's theory. It's theory with numbers, but it's it's
just theory. And I've spent demostramas over fifteen years now.
(05:36):
I've interviewed enough economists to be like, yeah, I don't
think any of you, like truly know for sure.
Speaker 1 (05:41):
What's the old joke if you laid all the economists
in the world and to end they couldn't reach a conclusion.
Speaker 2 (05:47):
I love it, Love it, Aaron. Thanks