Below-market rates would have to be subsidized by the other customers of lending institutions and US taxpayers. No thanks.

Artificially lowering rates would also create another credit bubble. I don't see what's so bad about current mortgage rates, they are still very low historically.

This sort of crazy, baseless, and socialist crap is what got us into this mess to begin with. If house prices were allowed to settle on prices that the free market dictated and the bad assets got flushed out of the system at the expense of the idiots rather than the taxpayers we could recover much sooner. How is putting yet another artificial boost in house prices going to fix the underlying problem of overinflated assets in the hands of people who can't afford said assets?

I think Mike Garibaldi-Frick of The Huffington Post put it best in his recent article which I will quote from:

"Even though these rates are historically low, we are in the midst of a unique financial credit crisis with falling home values and thousands of additional ARMs adjusting in the next two years -- which can force even more people out of their homes. We should be focusing on getting tangible relief to homeowners by helping them get into stable 30 year fixed mortgages at a low rate and help buyers establish a floor to the housing market decline.

By stipulating a 30 year mortgage lending rate of around 5% or less, the government can help homeowners refinance their expensive ARMs into lower monthly payments and new homeowners can start buying again. This does not mean we have to go back to weakened sub-prime loan criteria; but that current homeowners are given a real chance to stay in their homes with lower interest rate payments and those new homeowners able to qualify can get an attractive rate and lower monthly payments.

The Feds keep lowering interest rates for banks, but banks don't pass these rate cuts on to consumers via less expensive mortgage rates. The widening spread between bank lending rates and real mortgage rates takes more money from homeowners and puts it into the banker's pocket. Plus, banks lower their CD and savings rates which hurt responsible people with savings and retirees.

So bank margins double, while Americans continue paying high margin bank rates for car loans, mortgages and credit cards. Rate cuts also increase inflation so average Americans are getting doubly hit: no relief on consumer debt, plus paying higher prices for food and other daily expenses.

Since the bailouts have still not trickled down to Main Street, it's time the government starts attaching real tangible benefits to it's economic relief legislation such as mortgage rate cuts for current homeowners and new buyers."

KingCheap said:It wouldn't be considered below market rates. There are things they can do to encourage dropping the now artificially inflated rates. Rates right now should be lower, but banks have them inflated.

If the banks are ripping people off with inflated interest rates, they're sure doing a really bad job of it considering how much money they're losing in mortgages.

tyrone3971 said:This sort of crazy, baseless, and socialist crap is what got us into this mess to begin with. If house prices were allowed to settle on prices that the free market dictated and the bad assets got flushed out of the system at the expense of the idiots rather than the taxpayers we could recover much sooner. How is putting yet another artificial boost in house prices going to fix the underlying problem of overinflated assets in the hands of people who can't afford said assets?

Quoted for truth. Thanks!

KingCheap said:The Feds keep lowering interest rates for banks, but banks don't pass these rate cuts on to consumers via less expensive mortgage rates. The widening spread between bank lending rates and real mortgage rates takes more money from homeowners and puts it into the banker's pocket.

Umm.. You're talking about two different rates. Short term rates vs long term rates. The short term rate is less than 1% .. the 10 year treasury is 4%.

I don't think you have any serious understanding of how mortgages, bond, and interest rates work. Government can't arbitrarily force banks to lower rate. There are impacts on the other side. Such as:

Plus, banks lower their CD and savings rates which hurt responsible people with savings and retirees.
So basically you are saying that banks should lower their intake and increase the money that they give out?

First of all, it seems as though some of you that have responded read into my comment and the article from The Huffington Post, something that isn't actually there - the word 'bailout'. What some market analysts and commentators are suggesting isn't a new bailout to bring rates down, but simply using the existing one already passed, which I didn't like in the first place, to help influence the rates down. I personally believe that no bailout money is needed in order to bring the rates down as this will inevitably happen.
Secondly, are any of you that this has struck a nerve with actually wanting higher rates? If so, is it because of a vested interest in seeing rates go up? Or, are you merely reflecting what many mortgage brokers are saying to their potential clients 'don't wait for a lower rate, lock now' simply because they need the business in this dead real estate market?
I, along with other business reporters and analysts believe this economy will not turn around until we see rates around 5% or lower for qualified buyers. This does not necessarily mean we believe the Fed should pump additional money into banks to acquire this goal, even though that has been done in the first half of the 20th century to effectively buy points on behalf of home buyers.
Lastly, does anyone agree that a 30 year fixed mortgage rate of .875% less than what we are seeing now (Pen Fed is at 5.875 as of 11/11/08), would benefit the nation? I believe it would. Do I think it will happen? Yes. The question is when. I have stated, sooner is better than later in order to offset some of the deeping impact of this crisis. Surely, most regular consumers, home owners, home builders, construction workers, real estate professionals, building supply industries and many others would agree a lower rate would benefit the economy.

LH2004 said:If you're going to start dictating prices, can we get beers down to a nickel? That's the kind of bailout I could use.When a nickel is economically viable price for beer but the beer makers are charging more because they need to repair their depleted capital base.

Sorry, you just don't understand the fundamentals of finance, mortgages, or how the entire process works.

KingCheap said:First of all, it seems as though some of you that have responded read into my comment and the article from The Huffington Post, something that isn't actually there - the word 'bailout'. What some market analysts and commentators are suggesting isn't a new bailout to bring rates down, but simply using the existing one already passed, which I didn't like in the first place, to help influence the rates down. I personally believe that no bailout money is needed in order to bring the rates down as this will inevitably happen.

How does the government influence rate? The government doesn't really influence rates, it is the federal reserve that influences rates. They do this by raising and lowering the amount of money in the money supply. They can also do this by changing the the short term rate for the discount window. This is the rate that banks borrow from the Federal Reserve on an overnight basis.


Secondly, are any of you that this has struck a nerve with actually wanting higher rates? If so, is it because of a vested interest in seeing rates go up? Or, are you merely reflecting what many mortgage brokers are saying to their potential clients 'don't wait for a lower rate, lock now' simply because they need the business in this dead real estate market?

None of the above. What you are suggesting is fundamentally improbable. You are asking the government to ask the bank to lower interest rates. Please explain to me by what mechanism you would want the government to do this. Banks serve the function of taking in deposits (your checking, savings, and CDs) and lending them out (mortgages, auto loans, and credit cards). If you lower the rate of one, you have to lower the rate of the other. [This was a point that you didn't get from your previous post...that both of them are interconnected].

Secondly, the 10 year treasury bond is at 4% interest. So banks have a choice of 1) lending money to treasury at 4% at absolutely (as far as we know) no risk or 2) lend it out to a home owner at significant risk. To account for the risk of the second option, they have to lend at a higher rate than the treasury the treasury is paying. In an environment where the prices of homes are dropping significantly, they have to account for this risk. Let's just say this: Given the choice, would you put your money into an ING account at 3.75% or lend me the money at 4%. If you were going to lend to me, you would clearly only do that if I was paying significantly more than the risk of me as a creditor


I, along with other business reporters and analysts believe this economy will not turn around until we see rates around 5% or lower for qualified buyers. This does not necessarily mean we believe the Fed should pump additional money into banks to acquire this goal, even though that has been done in the first half of the 20th century to effectively buy points on behalf of home buyers.

That is fine and dandy. But as I said previously, how do you get rates to be 5%? George Bush can't just walk onto the trading floor at Goldman Sachs and say "hey buddy, can you guys lower interest rates?"


Lastly, does anyone agree that a 30 year fixed mortgage rate of .875% less than what we are seeing now (Pen Fed is at 5.875 as of 11/11/08), would benefit the nation? I believe it would. Do I think it will happen? Yes. The question is when. I have stated, sooner is better than later in order to offset some of the deeping impact of this crisis. Surely, most regular consumers, home owners, home builders, construction workers, real estate professionals, building supply industries and many others would agree a lower rate would benefit the economy.
Again, lowering rates does not solve the problem that we have now. Lowering rates will not help the guy that has a loan to value (LTV) of > 100%. Why would any banks refinance $500K mortgage to a house that is now worth $300K?

Here's the fundamental problem: You are talking about a goal, but not discussing the path to get there

Please explain to me how you want banks or the government to lower interest rate
What market mechanism should the government use to do such a thing?
What are some of the impacts to the creditors?

This is really nothing more than:
1) Steal underpants
2) ???
3) Profit!