Despite Fed cuts, mortgage rates rise

[TexasLawyer]

Source: Boston Herald

Despite Fed cuts, mortgage rates rise
By Jerry Kronenberg

Tuesday, September 25, 2007

The Federal Reserve’s recent bid to boost the economy by cutting interest rates has apparently backfired when it comes to mortgages. Mortgage rates are rising instead of falling, with Bankrate.com reporting average 30-year rates added 0.1 percentage points yesterday to hit 6.08 percent.

<snip>

But while cutting the federal-funds rate directly impacts short-term borrowing like credit-card debt, it doesn’t automatically affect long-term loans like mortgages. Instead, banks generally base mortgage rates on 10-year U.S. Treasury bond yields, which have risen 0.23 percentage points in recent days.

McBride said Treasury yields have gone up because some bond investors fear the Fed cut short-term rates too much, risking inflation.

Inflation is bad news for mortgage investors because they agree to lend money at fixed rates for up to 30 years. So, unexpected inflation can ruin these investors’ returns. “Inflation is the worst enemy of investors that buy long-term (debts),” McBride said.



Read more: http://www.bostonherald.com/business/general/view.bg?articleid=1033900

[Warpy]

1. Not only that, but try to get a mortgage, period.

A neighbor is moving, selling a post war crackerbox and buying a doublewide on an acre of land. She is a licensed RN and has a job at the destination.

The mortgage company is throwing up roadblock after roadblock on an $80,000 loan, even though they have equity in their present house to back it up and an income that exceeds that in their new area. They are being assholes, going out of their way NOT to lend money, while two years ago they'd have lent ten times that amount to anyone who drew breath.

It's gone from one extreme to the other. It doesn't matter what mortgage rates look like if you can't get one.

[1932]

7. I wonder if lenders are certain that there will be inflation and want to hold off

on as much lending as possible for a year or two until the dollar settles into its new, much lower value.

[Lone_Star_Dem]

2. Yes, but how's the DOW?

The only people who would feel any relief from the cut were those with home-equity loans. The rest are cut adrift.

[Skink]

3. You have no idea how bad it is out there No Idea!!!!!

:rant:
:woohoo: :woohoo:

[flaminbats]

5. Democrats should be shredding the neocons with this!

Republicans didn't hesitate to use this against Jimmy Carter, and to demonetize the Democratic party on economics in the 70's and 80's. :eyes: ok..untenable bad pun.

but Clinton and Bush have changed this! too many Democrats running for President and for Congress are afraid of offending Republicans. ohhh my, how can we blame Bush and a Republican Congress for an economic policy that has added nearly $3 trillion to the national debt, which sacrifices our wages only to increase inflation? its unfair to blame them for an economic policy which gives us unaffordable gas prices in return for the Single-payer, government-run, one-size fits all, big spending Republican high tax war for Iraq!

lets be nice to Republicans..after all they think that dissent and divided government are serious threats to national security and military leadership, that civil rights threatens and insults law enforcement, and it is only ignorant for voters to call America a democracy. these poor Republicans! blaming them for 9/11 or questioning them in a time of war is just like burning the American flag, just another act of treason. cutting them off in a Congressional debate or on the floor is just too mean

[Tempest]

4. HaHa! I predicted this

I knew banks and other institutions who were heavily invested in mortgage loans would fight back and keep mortgage interest rates from falling along with the prime rate cut.

Mortgage investors would rather drive themselves off a cliff than put on the brakes and minimize the damage they are going to experience.

[progressivebydesign]

6. Mortgage companies have to be the dumbest ever...

yah.. laying off thousands in your industry, so what do you do? Make it even harder for people to use your product. D'oh! Greedy SOBs.