[pjungwir]

One way this might affect ordinary people is the choice between investing or paying down a mortgage. The day you get the mortgage, it probably feels like a good risk-adjusted return to pay it down. "Risk-free 5% return!"[0] But if you have a low 30-year rate and interest rates rise enough, there might be low-risk investments that pay better than extra mortgage payments.

This is one doubt I've always had about Dave Ramsey-esque advice to aggressively pay down your mortgage: In every analysis I see the rate on investment is static, but we know that's not true, and for a long time it's seemed inevitable for rates to go up eventually.

[0] Not strictly risk-free if you wind up needing the cash or your house tanks in value, but that's the pitch.

[jfoutz]

I think if you don't make a whole lot of money (like retirement is going to be kinda scary) and you're living in the house you're planning on dying in, paying it down makes sense. it's a very easy way to hold on to some wealth and get to the point that you don't have house payments anymore. maxing out 401k is better, you'll end up with more money, but there's some real security in outright ownership.

Paying down the mortgage with the rates we have now, aside from personal security, don't make much sense to me. If you're in an ARM and the payment keeps creeping up, then yeah, it's a better move to pay down early.

[rodgerd]

> Paying down the mortgage with the rates we have now, aside from personal security, don't make much sense to me.

You must be quite young. The 25-30 year window most people are now taking mortgages out can cover dramatic economic swings. Thirty years ago mortgages in my neck of the woods were up around 20%.

Assuming that rates will be this low forever is like believing we were in a "long boom" in 1999.