Falling mortgage rates buoy homebuyers, befuddle experts

[Robb]

Falling mortgage rates buoy homebuyers, befuddle experts

Mortgage rates were supposed to be rising by now, helping to gradually cool the nation's red-hot housing market.

The Federal Reserve has been raising short-term interest rates steadily for nearly a year. The economy is growing at a healthy pace. Energy costs are up. If history were a guide, long-term rates would be rising, too.

But they are not.

(snip)

"The housing market is going to be robust if rates stay where they are," said Freddie Mac's chief economist, Frank Nothaft. "But it's hard for me to fathom why they would stay this low for long."

(more)

[ckramer]

1. Things alway take people by surprise

People taking 300,000$ load (even in a low rate of 5.6%) are really sign up for their slavery for life. Unbelievable.

[Voltaire99]

14. Exactly. This way to the cliff, lemmings. (nt)

[snooper2]

2. My finance dude was stunned..

I'm working on buying a house, and was given a rate of 6.0% three months ago while seeing where my credit stood.

Just got locked in at 5.6% yesterday! The guy I'm using to work the deal couldn't believe the rates are so low. He's around 65-70 and has been doing this work his whole life.

[denverbill]

3. It's symptomatic of how shitty the economy really is.

Interest rates follow the laws of supply and demand too, just like anything else. If there is $1 billion people want to loan out, but only $20 million people willing to pay a 5% interest rate to borrow it, interest rates will have to go down in order to increase demand.

Demand for borrowing money is very low, so interest rates are staying low.

[phantom power]

4. It also requires a low prime rate.

If the Fed ups the prime rate, it will eventually force mortages to rise with it. No doubt, they are working feverishly to keep the prime rate low, since they will crash the last major economic engine if they don't.

It seems like the best (least bad) course of action at this point is to start raising it, slowly, 1/4 point at a time. Try to deflate the bubble as slowly as possible.

[edhopper]

6. Aint working

We are now going toward an inverse rate curve. This usually leads to very bad economic times. The Feds are also suppose to regulate lending. But are doing nothing about the interest only and horrible ARMs being given to unknowledgable borrowers. This will end badly.

[phantom power]

9. they really failed at regulation.

Interest-only loans, balloon loans, ARMs, in my opinion all of them should be illegal. I also don't see why it would be hard to put stronger limits on how much credit a person can aquire, based on salary and assets.

Current credit limits appear to be based too much on speculation. Granting people huge mortages, on the theory that the property will continue to grow in value fast enough to offset the dangers of loan default.

Rampant speculation is always the final phase, before an industry crashes, isn't it?

[lyonn]

15. And then we the people must pay the price

as we did in the 1980's. Clintons' piddlin' Whitewater deal was nothing compared to Silverado Savings, Bushies', and thousands of others like it. People were loaning money on car hulls and burned out houses. We the peope ended up paying for those also while the big boys made a killing off the dredges/repossessions. Is that a freight train coming?!

[redacted]

5. Or is it a symptom of the huge growth and competitiveness of the mortgage

industry. They are willing to cut profits in order to get the business. This industry has grown exponentially with low rates, etc . . . it's bracing itself for a crash as well.

[AP]

7. Read somewhere that it reflects long term bet the US economy is going no-

where.

[leesa]

8. Simply baffling! Could it be that you are going to fleece the sheeple as

much as is humanly possible before you let it crash?

[edhopper]

10. Ding, ding, ding..

we have a winner:-D

[not fooled]

13. you got it

moneymen (*/greenfuck puppetmasters) keeping the scam going as long as posslble. gee, there's a 2006 election coming up--the 'pukes won't want a crash before then.

hey, maybe this is the secret to keeping the bubble from bursting--not actual change in economic fundamentals but rather the 'pukes' desire to keep this little bit of the economy going for the suckas.

[Mizmoon]

11. They were supposed to be rising four years ago n/t

[Vinca]

12. There's a huge danger that buyers will go far, far in the hole on a home

that may also DECREASE in value. It happens. I can't imagine trying to sell a house only to find I still owed the bank money.

[edhopper]

16. You would be amazed then

at how many people are taking interest only loans. They never get equity in their house.

[thinkingwoman]

18. yeah, I cannot understand

the appeal of an interest-only loan. Sure it reduces your payment (by a utility bill or two if you're lucky), but the lack of equity should make anyone with half a brain just say no.

These days, with the employment situation as it is, people should buy a home they plan to sell in a couple of years when they have to move on in search of work. No way is an interest-only loan a good idea in that, or frankly any other situation I can fathom.

But that's just me. I'm no expert.

[Robb]

19. There are situations where it's appropriate

...very few, very specific.

For myself, already having a good deal of equity in my house, and undergoing a dramatic, and temporary, reduction in income made an interest-only option a must, to even stay in the house.

Refinancing or selling in two years isn't a bad option... in the meantime, I get to keep the equity I already have in an investment that will likely appreciate at least as fast as anything else I could put the money in... and in the meantime provides a roof over my head. :)

[ckramer]

17. The worst scenario:

Housing price going down despite the low interest rates.

In other words, low interest rates can only save so much of the boosh economy.