Lower U.S. mortgage rates lifted demand for mortgage applications last week, a trade group said on Wednesday, and demand should escalate after a new broad-brushed government plan to support the housing markets.
On Tuesday, the Federal Reserve and Treasury unveiled a plan to buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae, as well as up to $100 billion of debt issued by Fannie, Freddie and the Federal Home Loan Banks.
This massive infusion is expected ultimately to reduce U.S. mortgages rates further, as they have been hovering at high levels over risk-free government debt.
Average 30-year home loan rates fell to 5-1/2 percent on Tuesday after the government lifeline was announced, according to Bankrate.
Lower loan rates should help revive the worst U.S. housing market since the Great Depression.
Lower rates won’t hurt, but it won’t revive the housing market- It will only keep it on life support longer. It is important to remember that what is driving this downturn is the massive supply of homes that was built during the boom years. The supply was built for people who didn’t qualify for loans but got them anyway, as well as a supply for all the speculators.
A slight bump in sales now will not overcome higher job losses, tighter credit standards, and a nervous and more conservative America. People are looking at their 401Ks and their stock portfolios and not feeling as rich as they were. This will continue to plague the housing market, particularly for upper end homes.
The Fed can hold a "revival", but don’t expect a big crowd of people to show up.
It is amazing how the marketing arms of this financial mess have stepped up their campaigns. How now is the time to buy. Also now is the time to hop into the stock market. How this is such a rare experience for the little guy to compete with the institutional buyers. Wow, talking about red meat. I guess it can’t hurt to have lower rates but what about 1-2 years from now with the idiots running the fed. Crash again? Seems to me any money taxpayers spend should not help one SPECULATOR. If this money goes to truly rebuilding homeownership it might help some. My confidence level with our tax dollars is not very high.
It’s not going to revive anything when Joe six pack has no job, or a job with declining real wages.
They can cherry coat this over, and over, and over but I believe lower rates and the lure of easy money got us into this mess in the first place.
This is a good time for people to refinance into a conventional mortgage, that’s an upside. Maybe they can start cashing in, instead of cashing out.
one upside may be that some of those responsible folks out there can get a better rate. it would be nice if some of us that DIDN’T get us into this mess caught some sort of a break. i can’t qualify (self employed) to refi even though i have great credit and pefect history……but i’m sure some people that deserve to may get a better loan with these rates.
Frankly, I’d like a pony, too.
Dear Santa, Please make foreign govs buy lots of our risky MBS paper at low rates so we all don’t look so lame and get called ugly names at school…like idiots,loosers,etc.
Thanks,
Beny, Billy & Hanky
Twist,
You hit it on the head “A slight bump in sales now will not overcome higher job losses, tighter credit standards, and a nervous and more conservative America. People are looking at their 401Ks and their stock portfolios and not feeling as rich as they were. This will continue to plague the housing market, particularly for upper end homes.”
Yossarian,
You are right about the loss of city jobs. It is going to get very ugly.
The entire basis of the economic stimulus has been to free up credit so banks can lend and consumers can borrow again. Who cares about “small business growth” through credit or whatever else is being preached to legitimize all of this easy lending? Ultimately, all anybody in the U.S. is in business for anymore is for Joe Sixpack to keep spend, spend, spending beyond his means.
Clearly, none of our leaders have any long term vision, whether they are simply naive or working toward some other agenda. We are simply trying to subsist on our consumer spending model that is a dead-end road. Everyone is already tapped out, we can’t go any further like this.
The only place this can lead is the collapse of our fiat currency system and the adoption of a world currency as the dollar plummets from its reserve status. At that point, I can’t even begin to wrap my mind around the global scope and consequences of such a thing, but it can’t be good.
Mortgage rates are the least of anyone’s worries right now. If 28 percent or whatever of homeowners are underwater, at least that many more are on the brink with not enough equity to do anything. Who’s going to refi?
“Collapse” for sure, Igor.
Lots can refinance, I believe they’ll put you into 50 year mortgages in order to get you current with your mortgage and a payment you can afford. They don’t care if the loan ever gets paid off. We are beyond that.
The image of the lender is so bad some have promised not to foreclose during the Christmas holiday season.
I might refinance, I don’t really need to, but shaving another 3 quarters of a point could accelerate my payoff another thousand per year, albeit a 3-4 year recoup on the refinance, it shouldnt be a difficult decision for anyone who wants to pay their mortgage off someday, or even to keep more of their money in their pocket.
On the other hand, people I know that owe piles of money on a mortgage love the write off, they see no sense in paying down mortgage debt.