effect of lower interest rates on home prices

[(former)FormerSanDiegan]

One comment: All historic correlations will be obsolete if US dollars are no longer the world currency.

Nice snarky one-liner. But devoid of facts

FACTS :
1. The LIBOR index is a rate based on dollar-denominated deposits.

2. Even as the dollar sinks to unprecedented lows against the euro, the relationship I pointed out still holds.

3. The British Bankers Association publishes LIBOR rates in 10 currencies. At least 8 of these are not the world’s reserve currency.

OPINION:
The loss of dollar’s role as the world’s currency will likely put upward pressure on interest rates in US dollars, but it will not likely significantly impact the relationship of these rates measured in London versus the US.

[(former)FormerSanDiegan]

SD R – got it, thanks.

[(former)FormerSanDiegan]

SD R – got it, thanks.

[(former)FormerSanDiegan]

SD R – got it, thanks.

[(former)FormerSanDiegan]

SD R – got it, thanks.

[(former)FormerSanDiegan]

SD R – got it, thanks.

[JWM in SD]

“True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.”

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Second, how does the interest rate help an FB if their LTV has passed certain thresholds already? Especially given current lending standards.

[JWM in SD]

“True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.”

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Second, how does the interest rate help an FB if their LTV has passed certain thresholds already? Especially given current lending standards.

[JWM in SD]

“True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.”

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Second, how does the interest rate help an FB if their LTV has passed certain thresholds already? Especially given current lending standards.

[JWM in SD]

“True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.”

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Second, how does the interest rate help an FB if their LTV has passed certain thresholds already? Especially given current lending standards.

[JWM in SD]

“True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.”

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Second, how does the interest rate help an FB if their LTV has passed certain thresholds already? Especially given current lending standards.

[(former)FormerSanDiegan]

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Not really. The two have dropped by about 0.75% since summer.

Second, how does the interest rate help an FB is their LTV has already passed certain thresholds already? Especially given current lending standards.

Their existing loan is not impacted by current lending standards. Only those with Neg-am loans are impacted by LTV thresholds and those folks are likely F’d no matter what.

But, you’ve seen those loan reset charts, right. The next wave of resets are primarily Alt-A and prime borrowers. The idea is that many have teaser rate loans that reset in the next year or two and that because these rates will result in much larger payments these guys will toss the keys to the bank and provide a fresh source of REOs for us in 2009-2010.

Let’s consider those who could afford (perhaps barely)their original 3- or 5-year ARM at the original 5.5 – 6% rate, but who are facing resets in the next 2 years.

6 months ago, these folks would have been facing a 7.75% or higher loan upon reset, based on the 1-year LIBOR and a margin of 2.25%. That’s why the loan reset schedule seems so scary.
Today, they are looking at about 6.75%.

Another 0.75 to 1 point drop in the LIBOR index and their reset rate will be about the same as their original teaser rate.

So you see, rates matter for those who have loan resets coming. These are the terms of their current loan irrespective of current lending standards.

[(former)FormerSanDiegan]

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Not really. The two have dropped by about 0.75% since summer.

Second, how does the interest rate help an FB is their LTV has already passed certain thresholds already? Especially given current lending standards.

Their existing loan is not impacted by current lending standards. Only those with Neg-am loans are impacted by LTV thresholds and those folks are likely F’d no matter what.

But, you’ve seen those loan reset charts, right. The next wave of resets are primarily Alt-A and prime borrowers. The idea is that many have teaser rate loans that reset in the next year or two and that because these rates will result in much larger payments these guys will toss the keys to the bank and provide a fresh source of REOs for us in 2009-2010.

Let’s consider those who could afford (perhaps barely)their original 3- or 5-year ARM at the original 5.5 – 6% rate, but who are facing resets in the next 2 years.

6 months ago, these folks would have been facing a 7.75% or higher loan upon reset, based on the 1-year LIBOR and a margin of 2.25%. That’s why the loan reset schedule seems so scary.
Today, they are looking at about 6.75%.

Another 0.75 to 1 point drop in the LIBOR index and their reset rate will be about the same as their original teaser rate.

So you see, rates matter for those who have loan resets coming. These are the terms of their current loan irrespective of current lending standards.

[(former)FormerSanDiegan]

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Not really. The two have dropped by about 0.75% since summer.

Second, how does the interest rate help an FB is their LTV has already passed certain thresholds already? Especially given current lending standards.

Their existing loan is not impacted by current lending standards. Only those with Neg-am loans are impacted by LTV thresholds and those folks are likely F’d no matter what.

But, you’ve seen those loan reset charts, right. The next wave of resets are primarily Alt-A and prime borrowers. The idea is that many have teaser rate loans that reset in the next year or two and that because these rates will result in much larger payments these guys will toss the keys to the bank and provide a fresh source of REOs for us in 2009-2010.

Let’s consider those who could afford (perhaps barely)their original 3- or 5-year ARM at the original 5.5 – 6% rate, but who are facing resets in the next 2 years.

6 months ago, these folks would have been facing a 7.75% or higher loan upon reset, based on the 1-year LIBOR and a margin of 2.25%. That’s why the loan reset schedule seems so scary.
Today, they are looking at about 6.75%.

Another 0.75 to 1 point drop in the LIBOR index and their reset rate will be about the same as their original teaser rate.

So you see, rates matter for those who have loan resets coming. These are the terms of their current loan irrespective of current lending standards.

[(former)FormerSanDiegan]

But you are ignoring the spread between the Fed Funds Rate and the Libor rate. It is not headed in a favorable direction.

Not really. The two have dropped by about 0.75% since summer.

Second, how does the interest rate help an FB is their LTV has already passed certain thresholds already? Especially given current lending standards.

Their existing loan is not impacted by current lending standards. Only those with Neg-am loans are impacted by LTV thresholds and those folks are likely F’d no matter what.

But, you’ve seen those loan reset charts, right. The next wave of resets are primarily Alt-A and prime borrowers. The idea is that many have teaser rate loans that reset in the next year or two and that because these rates will result in much larger payments these guys will toss the keys to the bank and provide a fresh source of REOs for us in 2009-2010.

Let’s consider those who could afford (perhaps barely)their original 3- or 5-year ARM at the original 5.5 – 6% rate, but who are facing resets in the next 2 years.

6 months ago, these folks would have been facing a 7.75% or higher loan upon reset, based on the 1-year LIBOR and a margin of 2.25%. That’s why the loan reset schedule seems so scary.
Today, they are looking at about 6.75%.

Another 0.75 to 1 point drop in the LIBOR index and their reset rate will be about the same as their original teaser rate.

So you see, rates matter for those who have loan resets coming. These are the terms of their current loan irrespective of current lending standards.

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