Thursday, October 9, 2008

More Lower Mortgage Rate Promises

The economy is in really, really rough shape. An international round of rate cuts headed the news cycle yesterday. Desperate for a silver lining to decrease one's anxiety with opening their 401K envelopes we are hearing about how mortgage rates will hopefully be lower. Yippee! Collectively we have lost $2 trillion but mortgage rates are lower. Yippee!

Even though most who need to can not refinance due to being underwater or have too many other credit problems to qualify rates are (hopefully) going down. Bloomberg explains the issue in this article titled Lower Mortgage Rates May Be Silver Lining in Turmoil. Lets take a look -

A nationwide survey of consumer credit rates showed 30-year fixed-rate mortgages averaged 5.8 percent yesterday, according to Rates were 6.26 percent on Aug. 29 and also July 31, in the same survey. Home-loan applications rose 2.2 percent last week, according to the Mortgage Bankers Association and purchases were at a six-year low the previous week.


Rates aren't as low as earlier in the year. The average 30- year fixed-rate mortgage was 5.5 percent in January, a three- year low. At yesterday's rate of 5.8 percent, monthly borrowing costs for each $100,000 of a loan would be about $587, up $19 from January.


With credit tightening, consumers should think twice about making any extra payments on their mortgages in the short term, said Gibran Nicholas, chairman of the CMPS Institute in Ann Arbor, Michigan, a group that certifies mortgage bankers and brokers.


Your home-equity line ``isn't guaranteed,'' Nicholas said. ``The safer thing to do is to move money to a place where you can control it.''


Major mortgage lenders including New York-based JPMorgan Chase & Co., Citigroup Inc. and Cleveland-based National City Corp. have reined in home-equity lines of credit even to customers in good standing. Banks are looking at factors outside an individual's control, such as a weakening local economy or declining area home prices.

Notice all the positive advice about increasing and/or holding your debt steady. Have any HELOC left - take it and run. Is there any safe place to put it? Maybe gold. This may be good advice for the few who will not fritter it away - but most people will burn through the money just as they did during the housing bubble.

The advice seems to be aimed for those that generate their income through processing the paperwork. This almost sounds like another edition of "consider the source". Instead of trying to reduce debt and get in a safe position the encourage in the middle of mass uncertainty (and possibly a devastating credit crunch) is to load up on debt. Yeah, that makes sense. /sarcasm

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