Cutting the funds rate again...?

[blzrul]

Rumors are the funds rate will be cut to .50 p/c...or more.

 

Rationale stated is that since real estate is driving the crappy economy, lower rates will make mortgages more affordable, etc etc.

 

However, the rate is already pretty low, yet mortgage rates haven't come down - Treasury bills are holding somewhat steady.

 

So what's it going to take? I understand a disincentive to save, but slashing interest rates hasn't done squat so far...

[SD Jarhead]

The Fed's 'tool box' is nearly empty. There's really not that much more they can do. How long before people lose faith in Uncle Sugar's ability to help 'them' out?

 

Did you see 60 Minutes this past weekend? They had an interesting piece about how far along we are in the real estate crash. They had a dude on who opined that we are only about 1/3 of the way through the housing crisis and are looking at at least two years of times like this.

 

If this guys opinion is correct, then how many tricks does the Fed have up its sleeve over that period? I would argue, not that many.

 

You may have noticed Deb that I'm not jumping on the Obama feeding frenzy. This guy is going to have a very difficult time over the next four years. While I don't like his ideas (most of them), I am rooting for a successful administration not just for him, but for our nation. Because at the end of the day, it aint about politics, but making us a stronger nation.

[YellowLinesandArmadillos]

The Fed's 'tool box' is nearly empty. There's really not that much more they can do. How long before people lose faith in Uncle Sugar's ability to help 'them' out?

 

Did you see 60 Minutes this past weekend? They had an interesting piece about how far along we are in the real estate crash. They had a dude on who opined that we are only about 1/3 of the way through the housing crisis and are looking at at least two years of times like this.

 

If this guys opinion is correct, then how many tricks does the Fed have up its sleeve over that period? I would argue, not that many.

 

You may have noticed Deb that I'm not jumping on the Obama feeding frenzy. This guy is going to have a very difficult time over the next four years. While I don't like his ideas (most of them), I am rooting for a successful administration not just for him, but for our nation. Because at the end of the day, it aint about politics, but making us a stronger nation.

 

I agree with you on the the real estate deal, from everything I am hearing it will be at least 2 years and you are right, Obama is going to have a tough road ahead... the jury is out... He is putting his team in place... some I like, some not so much, but the real deal is what policies and actions they pursue.... We shall see....

 

Show Me as the old saying goes, don't give me another pretty face or present me with a partisan solution.

[meazza]

Rumors are the funds rate will be cut to .50 p/c...or more.

 

Rationale stated is that since real estate is driving the crappy economy, lower rates will make mortgages more affordable, etc etc.

 

However, the rate is already pretty low, yet mortgage rates haven't come down - Treasury bills are holding somewhat steady.

 

So what's it going to take? I understand a disincentive to save, but slashing interest rates hasn't done squat so far...

 

Personally I think this is a global problem rather than simply a North American or US problem.

 

Good coordination from all policy makers will be very important in controlling this mess.

[blzrul]

I certainly would not want the job Obama is about to undertake.

 

I am still stymied a bit about the interest rates though. I got a 5% fixed 30 year mortgage in 2004. Right now the best I can do on a 10 year fixed, with points, to refinance, is 4.5%. The talk is now all about a 4.5% fixed 30-year rate...which I am not yet seeing. I'd expect then to see a lower rate for the shorter term - yet everywhere I look I still see 5, 5.6 and up. I will still go for this refi, because my payments (I currently pay extra principal each month but that would only shorten my term by 13 years) would be about the same... I'm just going to wait a couple of weeks to lock in assuming the 30-year drops in the next few days.

 

With 30-year fixed at 4.5% I would expect to see, for a shorter term with points, something more along the lines of at least 3.5% or 4%....it's a little frustrating.

[bills_fan]

I certainly would not want the job Obama is about to undertake.

 

I am still stymied a bit about the interest rates though. I got a 5% fixed 30 year mortgage in 2004. Right now the best I can do on a 10 year fixed, with points, to refinance, is 4.5%. The talk is now all about a 4.5% fixed 30-year rate...which I am not yet seeing. I'd expect then to see a lower rate for the shorter term - yet everywhere I look I still see 5, 5.6 and up. I will still go for this refi, because my payments (I currently pay extra principal each month but that would only shorten my term by 13 years) would be about the same... I'm just going to wait a couple of weeks to lock in assuming the 30-year drops in the next few days.

 

With 30-year fixed at 4.5% I would expect to see, for a shorter term with points, something more along the lines of at least 3.5% or 4%....it's a little frustrating.

 

 

that is because the Fed has lost control of short term interest rates (if they ever had it in the first place). The market has essentially stopped listening when the Fed cuts rates. If the Fed wants to bring down borrowing costs it must do an asset purchase, like it did a couple of weeks back with the MBS purchase.

[blzrul]

that is because the Fed has lost control of short term interest rates (if they ever had it in the first place). The market has essentially stopped listening when the Fed cuts rates. If the Fed wants to bring down borrowing costs it must do an asset purchase, like it did a couple of weeks back with the MBS purchase.

But ... what was the result of that action?

 

I guess at this point what is really holding us all back is confidence. Like I said, a 4.5% 10 year fixed is good and if things don't budge we'll probably do it, but it is irritating that the rate is so high given where the funds rate sits.

[Chef Jim]

But ... what was the result of that action?

 

I guess at this point what is really holding us all back is confidence. Like I said, a 4.5% 10 year fixed is good and if things don't budge we'll probably do it, but it is irritating that the rate is so high given where the funds rate sits.

 

Do you think they might be pricing in the current and future foreclosures? You bet.

[blzrul]

Do you think they might be pricing in the current and future foreclosures? You bet.

Yeh...that's partially my dilemma. I can refinance OR I can continue to pay extra principal, reduce my term and save interest on the current loan AND take advantage of the market and buy another house or condo...in this area, affordable rentals are in very short supply. I am really torn and what's holding me back is not the financial aspect so much as the fact that maintaining two pieces of property is a headache I don't need. So maybe I'll go for the condo or townhome...

[Chef Jim]

Yeh...that's partially my dilemma. I can refinance OR I can continue to pay extra principal, reduce my term and save interest on the current loan AND take advantage of the market and buy another house or condo...in this area, affordable rentals are in very short supply. I am really torn and what's holding me back is not the financial aspect so much as the fact that maintaining two pieces of property is a headache I don't need. So maybe I'll go for the condo or townhome...

 

Refi, pull all your equity out and buy AIG.

[Fan in Chicago]

Well, at least we know there won't be any more rate cuts:

http://news.yahoo.com/s/nm/20081216/bs_nm/...a_fed_preview_6

[John Adams]

Do you think they might be pricing in the current and future foreclosures? You bet.

 

Right. Banks are going to be a LOT more cautious. And that's a good thing in the long run but a rough adjustment in the next few years.

[DC Tom]

Right. Banks are going to be a LOT more cautious. And that's a good thing in the long run but a rough adjustment in the next few years.

 

Something people forget is that the caution isn't all on the banks' side. The American consumer has scaled back on borrowing the past few months.

 

Tough to lend money when no one's borrowing.

[John Adams]

Something people forget is that the caution isn't all on the banks' side. The American consumer has scaled back on borrowing the past few months.

 

Tough to lend money when no one's borrowing.

 

Yup. A twofer; savings rates are up, which again is probably a good thing in the long run (Assuming people keep saving) but it's a B word to a struggling economy.