Today, David Reavill at Independent Sentinel writes about one of the financial mainstays of Americans who pursue home ownership: the 30-year mortgage:
For most of us, purchasing our home is the largest single financial transaction we will ever make. It is also a tremendous obligation. As we sign that mortgage loan for the purchase, we often commit to completing 360 consecutive monthly payments—a thirty-year contract to pay both amortized principal and interest to our lender.
It is not an obligation that anyone takes lightly. I remember my mother’s incredible joy when she made her last mortgage payment and paid off “the house.” It would be best if you felt you would have the income or assets to meet those payments. You have to have a pretty optimistic view of your future to make such a commitment.
I’ve often thought that the best survey of the nation’s view of our future is the number of people who purchase a home and thereby take on that life-altering, long-term mortgage.
I applaud analysts who look for innovative ways to measure public opinion. I’d say we need a lot more writers with such inquiring minds. But as with the more conventional techniques, one must be careful about one’s inferences.
Given that anyone who buys groceries is aware that the price of just about everything has been increasing rapidly, how much confidence in “America’s future” is really warranted? With the big luxuries –second homes, new cars, and “big toys” such as boats – becoming unaffordable, and the little luxuries – high-quality foods and beverages, eating in restaurants, family vacations – threatening to follow, ever more Americans are uncertain about their ability to maintain their current standard of living. It’s reasonable to infer that John Q. Public would be more nervous about committing to a mortgage today than were his ancestors. But that looks at only one side of the equals sign.
The 30-year fixed-rate mortgage has inherent risks for the lender that have lurked in the fiscal woodwork like silverfish since 1913. Among other things, federal government entry into the mortgage market and government intrusions into lending decisions on the grounds of “discrimination” have created large uncertainties in that market. Lenders are largely attuned to such risks today, which is why many financial institutions that make mortgage loans are reluctant to issue long-term fixed-rate obligations. It’s become steadily harder to get one ever since the Nixon Administration. Those that remain willing to lend long-term are more likely to nudge prospective borrowers toward adjustable-rate mortgages, which reduce lenders’ risks.
Finally, a growing fraction of potential homebuyers have become just as aware as the lenders that their incomes, savings, 401(k)s, and so forth, all denominated in dollars, have no enduring value. They can be drained of value by the inflation of the currency, which the federal government has been doing systematically since 1913. The most recent orgy of federal spending — entirely fueled by inflation — has opened millions of eyes to the “money scam” perpetrated upon us by Woodrow Wilson and FDR. Add to that the mushrooming talk about wholesale changes to the “money system:” for example, the elimination of all physical currency and its replacement by an infinitely manipulable (and trackable) digital dollar. Rationalizations about the government’s “need” to pursue drug dealers and tax cheats cannot reduce the ominousness of such proposals.
He who knows that “his money” is infinitely fragile, capable of being taken from him by stealth at any moment, will naturally be wary of long-term obligations, regardless of whether he’s a borrower or a lender. To one who’s aware of money’s fragility, a 30-year mortgage looks more like a trap than a device for acquiring a home under favorable tax treatment. It’s a pity it’s taken Americans this long to awaken to what’s being done to us through currency manipulation, but at least some are awake to it now.