Thought I’d post on this briefly – the Fed cut rates by .5% today, meaning that the Prime rate will be at 7.75% instead of the 8.25% it has been at. The stock market is reacting with joy and that’s taking money out of the bond market, which is supposed to make mortgage interest rates rise.
We just got a novel reprice from one of our lenders. Even though the bond market is moving the wrong way, the reprice was for the better. This confirms something we have long suspected, that mortgage rates are artificially high due to lack of liquidity in the secondary market, not because the bond prices justify it.
Additionally, yesterday IndyMac, one of the nation’s largest lenders, added new programs and brought back stated-income programs that were on suspension. That’s the first tangible sign that the mortgage pendulum is beginning to swing back a wee bit.
No way around it, though – the financial markets are FUBAR. We’ve no idea what’s coming next. But it does appear that this crash might not be as horrible as CNN, et al. have been suggesting.