In 2003 Prime was 4% (FED rate was 1%)
30 YR Mortgage rates were 5% (15 YR was 4.75%) at the bottom, and not there for long.
Prime is now 8.25%, a move up of 4.25%, and 30 Mortgage rates are 6%. The 4+ point Prime move equates to a 1 point move in mortgage rates.
EVEN IF prime drops a quarter or half point, it is possible that 30 yr rates will stay the same or rise. It won’t surprise me if FED holds rates (or even raises!)
Profit margins at the major lenders that are left are razor thin. The losses that are buried and unknown need to be compensated for. The business model that many lenders had doesn’t work any more…SO with a cheaper cost of money, they may just get together and increase their margins.
There must be profits to offset normal operating expenses as well as compensate for the huge losses that haven’t been announced yet.
A small move in rates isn’t going to be a bailout.
A major correction of unlimited foreclosures with no intervention and returning to lending standards that require a minimum 10% down payment is what is needed.
Yes, it will be ugly for 5-10 years, and only the strong will survive, but the aftermath will be that civility will be restored.
Let the chips fall where they may and reward the responsible people. The Govt is not concerned about the little guy, they need to protect “the system” from collapsing…We were and still are real close to disaster.
Only a tiny % of homes are up for sale and there is panic. Imagine if 10% of homeowners wanted to sell. There is no market for that many homes. Equity in a home is a false sense of security, that disappears by the billions.
