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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Crimson Ghost who wrote (46343)12/30/2005 8:05:28 AM
From: Think4YourselfRead Replies (3) of 306849
 
That's the rates the banks pay to borrow from each other. Try getting that on a loan and, if you do, let me know where. I'd travel to anywhere in the country to get that rate.

You are right in that money is still very cheap at 5.7% on a fixed 30 year. It has been stable long enough to take the wind out of the refinancing craze but not the new borrowings. I have a theory (it's worth what you're paying for it) that the low rates are caused by all the mortgage companies that have sprung up over the last few years. They compete with each other for mortgages, of course, and there are so many that the competition is stiff. This has resulted in smaller margins because their rates have moved up but the rates to borrowers really has not. Once they (inevitably) start going out of business due to tight margins and lack of buyers, the rates will finally start going up. I don't believe borrower rates will go up significantly until this happens.

The bad news for bulls is that even with rates in the 5's sales are tapering off. What is going to happen when rates start going back to where mortgage companies are making normal margins, especially with a glut of housing on the market?
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