jb32 wrote:
Prime could easily be 13%+ if the Fed screws up the recovery and doesn't tighten monetary policy quickly enough. Or if they hit a home run, it could stay below 10%. However, with quantitative easing and the expansion of the Fed's balance sheet, I wouldn't go anywhere near a variable interest rate loan that I wouldn't be able to refi. You could get seriously burned if rates take off like many economists are predicting.
I agree that right now would be one of the worse times to bet on continuing low interest rates. Once money starts flowing through the economy again, all that cash the Fed pumped into the market is going to produce some intense inflationary pressure.
However! If one could structure their loans to minimize the risk, it might be doable. One option would be to keep the amount you borrow through a variable rate loan low and try and take those loans out near the end of your 2 years. Basically, use them for short-term borrowing, knowing that you'll be able to pay them off quickly if rates start to rise.
Then again, if you minimize your exposure to variable rate loans, how much do you stand a save? A couple thousand? Is it really worth the headache?
RF