Comments Off on Looking Back And Looking Ahead : March 17, 2008

Looking Back And Looking Ahead : March 17, 2008

2008
03.17

Mortgage rates fell last week on growing evidence of a recession, but far fewer Americans were eligible to take advantage.

Mortgage lenders continue to reduce product menus and that is leaving homeowners with fewer mortgage financing options than before.

As an added hurdle, Fannie Mae and Freddie Mac recently added “risk-based” fees on all conforming home loans, subjecting mortgage applicants to higher mortgage rates based upon:

  1. Property Type
  2. Credit Score
  3. Loan-to-Value

So, even though mortgage rates moved lower last week, for many homeowners, the cost of homeownership did not.

This week, the biggest scheduled news is the Federal Open Market Committee’s Tuesday meeting.

It’s widely expected that the Federal Reserve will lower the Fed Funds Rate by 0.75%, lowering Prime Rate to 5.250%.

This is good news for Americans carrying revolving consumer debt because those credit types are often tied to Prime Rate. Two popular types of revolving consumer debt are:

  1. Home equity lines of credit
  2. Credit cards

Meanwhile, a cut in the Fed Funds Rate should push mortgage rates up because Fed Funds Rate cuts can lead to inflation.

Since September 2007 — when the Fed started to cut its benchmark rate — the Fed Funds Rate is down 2.250% but mortgage rates are slightly higher. This is a normal occurrence and should happen again this week.

Markets will be closed for Good Friday this week.

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