Events Calendar
In This Section
New eateries expand menu of options
Food Notes: Join Lisa at culinary club's benefit dinner
Spread holiday cheer, not the flu at parties
Sheriff, education group hope to reach children early
Vatican turns toward the heavens
Ask Lisa - Bamboo cutting board
Serve edamame for the nutrition
Newbies get help to start cooking
Most Read Stories
Chapel Hill isn't rolling right along
New eateries expand menu of options
Akron City Council OKs higher speed on I-77
Coventry woman abducted at gunpoint; ex-boyfriend arrested after 100-mph chase
Patrick McManamon: Here's what the Browns should try the rest of the season
Suitcase causes bomb scare at Akron bus terminal
Stark County engineer dies at 49
Man says he was punched, robbed by 3 people in parking lot
Blogs:
Pets:
First Person: Inside St. Louis Pit Bull Shelter
The Heldenfiles:
Tuesday Notebook
Patrick McManamon:
Allen Iverson to the Cavs? Stop the madness!
Akron Zips:
Interview with a Temple blogger
Tribe Matters:
Indians announce spring dates
Cleveland Browns:
Quinn tabbed to start against Ravens Monday night
Kent State Sports:
KSU Notes – November 11
Cleveland Cavaliers:
Cavs: Yeah, on That Issue of Privacy
Buckeye Blogging:
Buckeyes Roll 100-60 / Season Outlook
Varsity Letters:
Twinsburg likes chances, but warns offense needs to deliver
All Da King's Men:
More On The Fort Hood Jihadist
Blog of Mass Destruction:
Simply Incapable of Telling The Truth
Akron Law Café:
Study says 2,200 uninsured veterans died in 2008 due to lack of health insurance.
See Jane Style:
Muffle Your Muffler
Car Chase:
Clock Tender- Extending the Life of Collector Car Clocks
Let's Talk Real Estate:
Rumors: Akron Starbucks Closing
Ohio Travels with Betty:
Kimberly requests information on living in Columbus, Ohio.
Sound Check:
Aeromsith looking for new singer as Steven Tyler contemplates solo career
HRLite House:
Personal Rant – Why People Do Not Live in Northeast Ohio
Akron Gamer:
Video: 'Modern Warfare 2' hits the streets
Lenders worry about rising delinquencies, foreclosures
By Susan Chandler
Chicago Tribune
Published on Tuesday, Jun 10, 2008
The Federal Reserve has aggressively cut interest rates. Houses are sitting around unsold. The stage appears to be set for mortgage rates to fall as lenders compete to attract that scarce quarry: the well-qualified home buyer.
You wish.
Rates on 30-year fixed-rate mortgages have remained stubbornly above 6 percent for months. Interest rates on those loans are averaging 6.09 percent, mortgage investor Freddie Mac reported June 5, an increase from the 6.08 percent the previous week. Rates on five-year adjustable-rate mortgages declined slightly to 5.51 percent.
Rates on jumbo loans, those larger than $417,000, were considerably higher, averaging 7.47 percent nationally on June 4, according to Bankrate.com.
Several forces are conspiring to keep rates up, economists and mortgage experts say, and they aren't going away soon.
When the subprime-lending bubble burst last summer, many large mortgage brokers went out of business because they could no longer find investors to buy their loans and fund their operations. That means the pool of mortgage lenders is much smaller than it has been in recent years, and billions of dollars in liquidity have disappeared.
Also, surviving lenders are still gun-shy about rising delinquencies and foreclosures, which have forced many to take large write-offs.
''Time heals all wounds, and we haven't had enough time yet to heal this wound,'' said Diane Swonk, chief economist with Mesirow Financial in Chicago. ''Banks and other lenders are being more conservative. They're saying, 'I need to be compensated for this risk.' ''
But there's even a bigger-picture reason behind the buoyancy in mortgage rates — the expectation that rising inflation is the biggest challenge the economy faces.
Many people think that the U.S. economy has narrowly avoided a recession and that the worst might be over. If that's true, the Federal Reserve is unlikely to lower interest rates further and, in fact, could start raising them again as soon as October.
With commodity prices rising, especially for oil and food, the Fed might have little choice but to tighten credit to slow inflation, which eats away at the value of wages as well as financial assets, economists say.
When inflation goes on a tear, investors want higher premiums for lending money, which translates into higher long-term interest rates.
''If people are concerned about inflation, they don't want to hold Treasury bonds,'' said Orawin Velz, senior director of research at the Mortgage Bankers Association in Washington, D.C. ''If there's a decline in demand for bonds, the price will go down, and the yield will go up.''
That's been happening recently with 10-year Treasury notes, the benchmark for mortgage interest rates. But investors are fickle and skittish, Velz said, and their expectations can change with the latest economic report.
For the downtrodden housing sector, the question is whether 6.5 percent interest rates will keep home buyers on the sidelines, slowing an already painful recovery.
Buyers spoiled by years of rates in the 5s need to remember that 6 percent is a very attractive rate, observers say. Plus, with housing prices declining, a buyer's monthly payment might be the same in spite of that slightly higher rate.
Mike Sante, managing editor of personal finance Web site Interest.com, agrees. ''Rates are pretty doggone good,'' he said. ''Historically, anytime you can get a rate below 6.5 percent, you're doing very well. We're not at the double-digit rates of the '80s or even the 7 or 8 percents of the 1990s.''
The Federal Reserve has aggressively cut interest rates. Houses are sitting around unsold. The stage appears to be set for mortgage rates to fall as lenders compete to attract that scarce quarry: the well-qualified home buyer.
Get the full article here.
Comments
Click here to post your comments
