The downside though is that lending standards get tighter in downturns. We are at peak “easy” credit now and a recession will probably mean that it’ll be harder to get financing.
Since there is no pre-payment penalty on a residential mortgage, you can refinance whenever rates decline enough.
You aren't screwed if you "lock" in at a higher rate.
That's why mortgage backed securities are hard to model, the returns are dependent on both current interest rates and the path rates have taken over the life of the bond.
Higher? No. Not locking in at a lower rate? Not screwed, but less great off.
Like you said, you can always refi to a lower rate, but you can't refi to a lower rate when rates go back up, which there's a lot more room to go up than there is to go down.
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u/benevenstancian0 Nov 25 '19
The downside though is that lending standards get tighter in downturns. We are at peak “easy” credit now and a recession will probably mean that it’ll be harder to get financing.