Despite the fact Fed policy makers cut the rates seven times already since September 2007, which amounts to a total of 3% decrease in borrowing costs, the average rate for a 30-year fixed mortgage dropped only half a percentage compared to the same period.
‘So, if that didn’t do the trick, then what will’ is the real question. These news come as a blow to consumers and who are due to refinance mortgages this year, as they will come face-to-face with a sharp jump in monthly payments.
“The Fed is trying to drive a car with only slight control of the steering wheel and no control of the gas or the brakes” said Clive Granger according to Bloomberg News. Clive Granger is professor emeritus at University of California, San Diego and the 2003 Nobel laureate in Economics. And the truth is that currently the fixed-mortgage rates seem to have disconnected from the 10-year Treasury bond.
Property investor in San Diego refused to make an offer on a property until she can get a fixed rate of 5.5% and that’s exactly the kind of buyers the Fed needs at the moment. But chief economist for the California Association of Realtors – which is based in Los-Angeles by the way -, said that the Fed’s interest rate reductions are having little near – term direct effect on the housing market.
Finally, as most buyers have put their plans on hold and are awaiting the housing decline, until prices hit rock bottom, the liquidity in the market worsens which eventually will force lenders to tighten up even more the supply of home loans.
- I am a financial services writer with experience in forex trading and stock market analysis.
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