Sunday, September 30, 2007

Cheap home mortgages continue to be readily available

Oddly, mortgage rates have risen, albeit modestly, in the two weeks since the Fed rate cut. This confirms my long-held view that mortgage rates a priced more due to supply and demand and the amount of liquidity in the pockets of investors than the actual Fed interest rate. The Fed rate cut probably also caused inflation expectations to rise which in turn caused longer-term Treasury yields to rise which in turn put a little upwards pressure on mortgage rates.

Despite all the talk of a credit crunch, people with good credit and a documented income can still get reasonable size mortgages (under $417,000) at quite cheap rates. The latest weekly mortgage survey from Freddie Mac shows the average rate offered for 30-year fixed-rate home mortgage is 6.42% (up from 6.34% last week) and the average for the 15-year fixed-rate home mortgage is 6.09% (up from 5.98% last week.) These are still truly great rates.

Sure, people with lousy credit or without documented income or money for a deposit are on shaky ground, but that's the way it should be anyway. Jumbo mortgages for expensive homes (above $417,000) may be somewhat more problematic, but still available depending on local conditions.

So much for being able to depend on the media for information about finance and the economy.

-- Jack Krupansky

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