According to the banker I was talking to yesterday, we’re looking at a good news-bad news scenario on rates.
The good news is that the rates are still low because there are still buyers for the paper.
The bad news is that it (supposedly) isn’t the foreign investors who are buying the paper, its those domestic lenders that are still solvent. It seems that since they aren’t making that many loans and they still have to make money that buying the best tranches at a discount is the next best thing.
Unfortunately, their liquidity is limited, and once they get maxed out that will be it. The other bummer is that once they buy those loans they are still vulnerable to any underperformance therein.
I’m just passing along the “rumor”. But if it’s substantially true we could soon be looking at significant increases in mortgage interest rates as these lenders run out of buyers for these loans.
