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Oh goody. Another round of foreclosures to make money off of!
Adjustable Rate Mortgages are pegged to a variety of benchmarks, not the short term borrowing rates.
LIBOR, COFI and CMT are the most common benchmarks.
One thing leads to another. Fed raises their rates, and mortgage rates usually follow, and those people who took out minimal rate ARMs will see their monthly payments go up. Refinance would be a good option for the ARM crowd. Since fixed 30 & 15 yr rates were also so low, I would think that most people took those as opposes to ARMs where the rate would have been a little less than fixed, but not much.
Again, I explained why this is not the case. You just casually decided not to answer why they were doing QE to affect long rates. If that is what the Federal funds rate did then why QE?
If high short rates cause credit flows to slow, then long term inflation is going to be more bullish for long rates. That is how the market responds. I don't really always agree with the market because interest rates are not the only thing that determines credit. Some times the rate is a side effect of tight credit since there is so much money chasing so few worthy borrowers. But anyway that is the bias. High short rates show a lower inflation bias, good for long bonds.
I think the real failure took place in 2004 when rates were rock bottom, and Greenspan went in front of TV cameras to encourage people to take advantage of ARMs and other exotic mortgages. He helped fuel the housing boom, and rates had nowhere to go but up, and up they went. Millions of people got burned.
He did the opposite of what the Fed claims to be their primary mission: to regulate the markets.
Oh come on now. Greenspan said there was some regional froth in the housing market.
This will also effectively increase our national debt.
Doesn't seem to be the case. Longer-term bond rates barely moved, showing that there was very little news.
I still make the case that there was no reason to raise rates. Inflation is low and the economy isn't overheating.
I suspect that the intense lobbying by the banks is what was behind the raise (banks make a greater spread when rates are higher.) If one noticed, loan rates rose while interest paid on accounts stayed the same.
Oh come on now. Greenspan said there was some regional froth in the housing market.
See that is what I do not understand. I do not do Economics for a living, and I CLEARLY saw the housing crash coming. I decided to put off buying a house because I thought I would get a deal after the crash...and I did! How could someone whose job revolved around economics miss it? How?
Doesn't seem to be the case. Longer-term bond rates barely moved, showing that there was very little news.
I still make the case that there was no reason to raise rates. Inflation is low and the economy isn't overheating.
I suspect that the intense lobbying by the banks is what was behind the raise (banks make a greater spread when rates are higher.) If one noticed, loan rates rose while interest paid on accounts stayed the same.
Yep, inflation is almost nonexistent, except for food. However, Yellen all but said that Fed needed some cushion to drop rates should they need to stimulate growth in the future, and dropping them the <0% is going to accomplish that. The lobbying from the banks might have been a factor as three of the top five faised their prime rate immediately after the announcement, but I think it's secondary to getting the Fed borrowing rate above 0%.
See that is what I do not understand. I do not do Economics for a living, and I CLEARLY saw the housing crash coming. I decided to put off buying a house because I thought I would get a deal after the crash...and I did! How could someone whose job revolved around economics miss it? How?
Bernanke was also claiming everything was great right up until it no longer was.
OK great the markets are going up. Next report will be great too and say the markets are going down. Then someone really wise will point out that the markets go both up and down. He/she will win a Nobel Prize. Yet the world will not reverse its spin no mater what the market does. Get out now and protect what you have gravity is against you..
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