Photo by Eamonn M. McCormack / Getty Images for London Blockchain Conference Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. The low mortgage rate you locked in years ago might be one of your best financial decisions. Peter Schiff argued it could also be part of a
Photo by Eamonn M. McCormack / Getty Images for London Blockchain Conference
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.
The low mortgage rate you locked in years ago might be one of your best financial decisions. Peter Schiff argued it could also be part of a “perfect storm of financial destruction that is about to hit.”
“Mortgage lenders will lose far more during the developing mortgage crisis than they did during all of the GFC,” Schiff warned in an Oct. 15 post on X (1), referring to the global financial crisis.
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He claimed, “Even without a single default, on paper mortgage lenders have already lost over four times more than they lost during the GFC.”
He blamed the Federal Reserve’s prolonged low interest rates and government-backed mortgages that let borrowers lock in cheap financing for decades.
“That sowed the seeds,” he wrote.
An alarming forecast, especially if your home represents much of your wealth or you’re counting on your investments to carry you through retirement.
But before you start picturing another foreclosure crisis, there’s an important distinction: A mortgage losing value to an investor doesn’t automatically mean your house has lost value, your payment is going up, or your lender is about to fail.
And keep in mind, if your loan or its servicing changes hands, the new company can’t just rewrite your agreement (2).
Why Schiff sees trouble in low-rate mortgages
“There is currently about $8.3 trillion in outstanding fixed-rate mortgages with an average rate of 4.6% and 25 years left to maturity,” Schiff wrote. “Given that current rates are 7.5%, the mark-to-market losses on those mortgages are already about $2 trillion. When rates rise to 8.5%, the loss will rise to $3 trillion!”
For comparison, Schiff put realized losses on defaulted mortgages during 2007–2010 at about $450 billion.
Keep in mind these are Schiff’s estimates, and his 8.5% scenario isn’t today’s reality. The latest Freddie Mac survey (3), released Oct. 15, put the average 30-year fixed mortgage rate at 7.40%, up from 6.27% a year earlier.
Here’s the basic pricing problem: If a new mortgage pays a substantially higher rate, an investor generally won’t pay full price for an otherwise comparable older loan paying much less. The older loan then needs a discount to compete.
That decline in market value is the paper loss Schiff is describing. The homeowner could still be making every payment on time.
Schiff puts two different types of losses side by side — money lost when borrowers default, and declines in what performing loans could fetch in a sale.
A mortgage can lose resale value even while homeowners keep making payments. That can hurt whoever owns the loan, but it isn’t the same as a borrower defaulting.
Who owns the loan matters. Mortgages are often sold and packaged into securities (4) whose investors receive payments from pools of borrowers. So, the company that originated your mortgage isn’t necessarily the one carrying its investment risk going forward.
You don’t have to accept Schiff’s prediction to examine your own exposure. If your home accounts for much of your wealth, how much have you built outside it?
Consider gold alongside your other assets
If much of your wealth is tied up in property, building investments outside housing can give you exposure to different sources of returns.
A gold IRA is one option for adding physical precious metals to your retirement portfolio. Gold is often used as a potential hedge against inflation and economic uncertainty, although its price can fall and it doesn’t provide guaranteed protection.
Opening a gold IRA with Goldco lets you invest in gold and other precious metals in physical form while keeping the tax advantages of an IRA.
Before committing, compare purchase premiums, storage and custodial fees, and selling costs. Those expenses affect how much of any gain you keep.
Approach real estate as an investment you can size
Owning a home gives you somewhere to live. Investing in rental property gives you exposure to a business with tenants, operating expenses, and potential income.
Fractional investing lets you commit less than buying another property outright. It still adds real estate risk, so consider it alongside the housing exposure you already have.
Arrived, a real estate platform company backed by investors such as Jeff Bezos, helps investors access SEC-qualified real estate investments, including rental homes, vacation rentals and diversified funds.
Beyond property appreciation, Arrived’s properties can help you earn passive income without the extra work of being a landlord. No midnight maintenance calls over burst pipes required.
All you have to do is sign up, then you can view a selection of vetted properties and start investing with just $100. That way, you can make sure the platform is right for you.
Once you become an investor with Arrived, you’ll have access to more than 596 properties in 67 plus markets. Eligible investors can also use Arrived’s secondary market if they want to reshuffle their portfolio.
And, for a limited time, investors can get a 2% account match when opening an account and adding $2,000 or more.
Build a portfolio beyond your property
Spreading investments across companies and asset classes can help reduce reliance on a single holding, even though diversification cannot prevent every loss.
If you prefer a hands-off, tech-forward approach to building wealth, Vanguard’s Digital Advisor puts the investing expertise of one of the world’s largest asset managers right at your fingertips.
It takes the guesswork out of investing by building a personalized portfolio for you using Vanguard’s well-known low-cost ETFs and mutual funds — then keeps things running smoothly with automatic rebalancing.
The platform also offers guidance on saving for retirement and lets you set additional goals as your life evolves.
It can even help you think through debt repayment strategies, potentially freeing up more cash to invest toward your long-term plans.
*All investing is subject to risk, including the possible loss of the money you invest.
Put the warning in the context of your retirement
A forecast about mortgage losses can’t tell you whether your own retirement plan is on track. That takes a closer look at your savings, debts, spending, and the income you expect to need.
A financial advisor can help crunch the numbers and build a plan that works. Because an advisor may guide decisions affecting decades of retirement, finding someone reliable is crucial.
That’s where Advisor.com can come in. The platform connects you with an expert near you for free.
Advisor.com does the heavy lifting for you, vetting advisors based on track record, client ratios and regulatory background. Plus, their network comprises fiduciaries, who are legally required to act in your best interests.
Enter a few details about your finances and goals, and Advisor.com’s AI-powered matching tool will connect you with a qualified expert best suited to your needs based on your unique financial goals and preferences.
Finding the right advisor isn’t always easy — there’s no one-size-fits-all solution. That’s why Advisor.com lets you set up a free initial consultation, with no obligation to hire, to see if they’re the right fit for you.
Ask the advisor to look at how much of your retirement depends on your home’s value. Would you have enough cash to cover expenses if markets fell just as you stopped working?
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