We'll also see lenders getting round the interest-rate cap and imposing charges in other ways.
BBC: NEWS | Programmes | Moneybox | Interest rates: Does a cap fit?
It wants Congress to impose a national interest rate cap of 10% on credit cards and other types of consumer loans and to cap rates at 6% for veterans.
Mr. Obama's plan is purely for fixed, not floating, rates at the 10-year Treasury rate plus 0.93% or 2.93% depending on the type of Stafford loan, and it has no rate cap.
Add in the likelihood that the rate cap leads to escalating subsidies, and no wonder that some Brazilians wonder whether an all-too familiar species has re-emerged in the Amazon: a white elephant.
Provident Financial Chief Executive Robin Ashton told Money Box that he was not in favour of a rate cap and rejected the claim that the 177 per cent APR his company charges is excessive or extortionate.
BBC: NEWS | Programmes | Moneybox | Interest rates: Does a cap fit?
The default rate for CAP borrowers was only a quarter what it was for subprime mortgage holders, even though the incomes and backgrounds of borrowers were similar.
Before FED Bernanke and Central Banks manipulated interest rates, the cap rate was about 7%.
Bill Rothe is probably getting a 4.3% or so cap rate on his San Francisco apartment.
Contrast someone who buys into a richly priced market offering only a 3% cap rate.
So that level is about where your home's cap rate should be in the best circumstances.
The lower the cap rate, the more an investor has paid for a future stream of earnings.
The average cap rate for apartments nationally was 6.1% in the first quarter, according to Real Capital Analytics.
Beaky would be buying at a 4% cap rate--a modest cool-off in the apartment market could fray Beakey's finances.
If Microsoft were a building, you'd say that its cap rate is 2.2%.
Thus, the race would be between the pace at which rental rates increase and the compression of cap rate spreads.
In New York (cap rate: 7% ), for instance, the rents are astronomical because of its density and renewed cachet.
Up the coast in Boston (cap rate: 2% ), however, the rents aren't that crazy, which makes a lease a better deal.
What's nice about a cap rate is that you don't have to guess at what housing prices will do in the coming year.
Pei building on East 30th Street in late 1999, we calculated they were getting an 8.3% cap rate (FORBES, Nov. 29, 1999).
The full year acquisitions were done at an average cap rate of 7.22% with a weighted average lease term of just over 14.5 years.
Think of this cap rate as the dividend yield on your investment, comparable to the dividend you get on a real estate investment trust.
That boosts the cap rate to 8.7%, making renting more tempting.
However, the average cap rate spread over the 10 year treasury yield has been 360 bps during that period, which compares to 430 bps today.
Say you buy a condo cheap enough to pocket a 7% cap rate--that is, you're getting a 7% net rental return by acting as your own landlord.
And the way the program works now, before these changes go into effect, is that the loan program has a variable rate with a cap of 8.25 percent.
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