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Jim Cramer Thinks the Super Low Mortgage Rates Are Going Bye Bye


The other day, Jim Cramer was talking mortgage rates, even though he’s a self-described “stock person.”

The backdrop was the better than expected jobs report, which jolted the bond market and sent mortgage rates higher.

In short, more jobs and less unemployment equates to a recovering economy, which ushers in inflation and forces the Fed to act (aka raise rates). Mortgage rates typically follow.

Cramer’s main message to The Street’s Jeff Marks was that banks are probably going to start increasing rates, and if you don’t have a cheap mortgage, you better get one fast.

Cramer Believes You Need to Act Now on Mortgage Rates

If you’re not currently the owner of a super cheap mortgage, you better get going on that. At least, that’s what Jim seems to think.

He told The Street that, “I feel strongly that this is it, the train’s leaving the station on mortgage rates.”

In other words, this ultra-low rate environment we’ve all been enjoying could be wrapping up sooner rather than later. And not returning anytime soon, or ever.

Cramer even went as far as to say that if you don’t have a mortgage at all, but own free-and-clear property, you should take out a mortgage.

What! Take on more debt just for the fun of it, while everyone else is rushing to pay off the mortgage early? More on that in a moment.

With regard to his call that the low mortgage rates are gone forever, I’m not so sure.

As I mentioned in an earlier post, I think there are still a lot of lingering issues both for the economy and COVID.

I don’t expect this fall to be a walk in the park, and thus I expect mortgage rates to stay low longer than expected.

That isn’t to say you should sit and wait for better, but you might have a bit more time than Cramer thinks. But it seems COVID is calling the shots, not inflation.

He Just Took Out a 20-Year Fixed Mortgage on a Property He Owned Free and Clear

Now back to Cramer’s message about taking out a mortgage even if your home is completely paid off.

It might sound crazy, but his logic is pretty sound here – borrowing against your home is very attractive at the moment because interest rates are hovering around record lows.

The man isn’t just telling you to go do it, he actually put his money where his mouth is and took out a new home loan himself.

Apparently, he owned a property free and clear and decided to borrow against it, using a 20-year fixed set at a low 3.25%.

That’s actually not that impressive to be honest, though if it’s an investment property then it’s a slightly different story.

Anyway, his point is that you can lock in a really low interest rate for the next 20 or 30 years and invest your money in the higher-yielding stock market.

He threw out PepsiCo stock as an example, figuring it would beat the 3.25% annual rate of return on his mortgage.

For the record, it’s returned something like 12% annually for the past decade, though the Nasdaq has performed even better.

Regardless, I mostly agree with this philosophy, though I don’t know if I’d go as far as to recommend taking out a new mortgage if you don’t have one.

Simply put, you get to borrow cheap money and invest it for much higher returns in the stock market, hopefully.

You just have to be disciplined and actually do that, as opposed to taking out a mortgage (cash out refinance), thinking you’re rich, and buying a Tesla with the proceeds.

One last funny fact to put a bow on this. It was only four months ago that Cramer paid off his mortgage with bitcoin gains.

So he paid off a mortgage and months later took out a new one.

(photo: Phil Leitch)

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