Will Interest Rates Rise Eight Times in the Next Two Years?

Barefoot,

This week I nearly had a heart attack when I read in the newspaper that economist John Edwards says that interest rates may rise eight times (!) in the next two years. There is no way my family could support this on my husband’s wage (I am a stay-at-home mum), be able to service our mortgage ($550,000) and afford to put our two children through school in a few years time. Can you please tell me that this guy is joking?

Erica

Hi Erica,

Is he joking? Well, let’s see: he’s an economist. He’s middle aged. He’s wearing a sober suit, sensible glasses, and he’s not smiling. I’m pretty sure he wasn’t doing a stand up routine.

However I think he was taken out of context. Edwards is smart enough to know that no one can predict the future (least of all economists, who on the whole are no better than dart throwing monkeys). What he was trying to say was that interest rates would move higher (at some point) in the future.

Here’s the interesting thing: anyone under the age of 45 -- and that includes you and me Erica -- has never experienced a recession in their adult lives. We have no reference point for it. In fact, our only experience is that housing prices go through the roof, and interest rates fall through the floor. People think it’s normal. But it’s not … not even close.

The truth is we’re living through one of the greatest booms in modern history. Eventually it will end (though only the monkeys know when). The only advice I’ll give you is to start preparing for higher home loan rates immediately. The worst that could happen is that Edwards and I are wrong ... and you pay your home off quicker.

No jokes.

Scott