Saturday, September 29, 2007

Fed Slashes Rate, Mortgage Rates Go Up

Since the last post the Fed slashed rates. All investors take note of stuff like this. One of the assumprions is that the cut in the Fed funds rate will trickle down to consumer and help create lower mortgage and credit card interest rates.

Well, not so far. From this interest rate newsletter I get from HSH Associates:

Mortgages: Rate Spreads Narrowing

September 28, 2007 -- Short-term interest rates may be lower, but fixed mortgage rates are drifting in the other direction, according to the nation's leading survey of good-credit mortgage prices. The average 30-year fixed rate mortgage (FRM) rose by two basis points this week to close the week at 6.82%. Hybrid 5/1 ARMs, often a popular alternative to the benchmark FRM, slipped backwards by seven basis points to 6.54%.

I've been intrigued by the scathing criticism of Barry Ritholz and Peter Schiff, gentlemen featured on Larry Kudlow's CNCBC show. I guess we're seeing the "Helicopter Ben" effect after all, swooping down to the rescue of investment firms and the banks who made the risky loans.

It's welfare for the rich!

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