Inflation is taking off. What does that mean for Interest Rates?

Inflation in the US is higher than it’s been since 1982. If you remember 1982 you probably remember your 18% Mortgage rate. So, if inflation is taking off now does that mean we’re heading for 18% rates again??? There is a correlation between high inflation and high interest rates, but no, I don’t believe we’ll get back up to 18% any time soon.
When inflation rises, interest rates must also rise to bring inflation back down. I don’t have a crystal ball but based on historical patterns I can predict with a pretty high level of confidence what is going to happen over the next 3-5 years.

6-18 Month Interest Rates Prediction

Over the next 6-18 months high inflation will cause high interest rates. Last year we were comfortably in the high 2% range for most Mortgage interest rates. Today we’re in the Mid to High 3% ranges. Going forward I predict that within the next 18 months we’ll see rates in the high 5% range, maybe even low 6%.

18-36 Month Interest Rates Prediction

Then what? Well, look around. Everywhere you look people are buying new homes, cars, boats, and vacations like they are a kid in a candy store. If interest rates jump from 2.75% to 5.75% in the next 12 months then people will have a much smaller taste for candy and all of these things will stop selling. When things stop selling the economy will enter another recession.

3-5 Year Interest Rates Prediction

I predict the next recession to happen by the end of 2023. Based on how much stimulus the government used during Covid and current inflation rates I see this recession being a strong one. As a result, the government will do what it’s been doing for the past few decades and it will manipulate the market to bring interest rates back down to all-time lows once again.

What should you do?

Take action now. If you can qualify to refinance and improve your mortgage either by taking cash out or lowering your interest rate then DO IT.
If you aren’t able to benefit now with a refinance then stay tuned as the chance will come again within 3-5 years.

Should you Wait?

No. I’m very confident with the information I’ve outlined above. What I’m not confident about is home values. Most recessions don’t affect home values. But the Great Recession in 2008 had a major impact on home values and some areas lost as much as 40%-50% of their home value. I can speculate where values will go during this recession but I feel much less confident in that prediction. This is why my recommendation is to take advantage of any opportunity you have now to refinance to improve your Mortgage before rates go any higher.

Please let us know if you have any questions and need to see your options.

Trevor Carlson

President – Reverse Mortgage Specialist

Heritage Reverse Mortgage

(435) 359-9000

Heritage NMLS #1497455 Trevor’s NMLS #: 267962

1060 South Main Street Bldg. A Suite 101B

St George, Utah 84770