Mortgage Rate News

Today is a big day for financial type news. It usually is at the end/beginning of a month. Today’s news has to do with downgrades on Alt-A loans and an expected interest rate cut from the Federal Reserve.

Downgrades for Alt-A mortgage back securities

S&P regularly rates different investments. And one of those types of investments in mortgage back securities. And many mortgage backed securities are getting downgrades today — mainly because many of them contain Alt-A loans.

Alt-A loans are those loans given to people with not so great credit. In these cases, the person does not qualify for prime mortgage terms, notably the prime interest rate being offered. So, instead, these types of borrowers are offered Alt-A loans.

These Alt-A loans feature higher interest rates than the prime home mortgage loans offered to those with better credit ratings. Sound familiar? It should. These Alt-A loans are basically subprime mortgages. It’s no surprise that mortgage backed securities containing Alt-A loans are being downgraded — to the tune of about $41 billion.

Interest rate cut

Today’s expected interest rate cut is big news in the financial markets, but it may not have a big effect on mortgage rates. After all, mortgage rates are figured on a more long-term basis than the Fed funds rate. However, there may be a slight effect.

More likely to affect mortgage rates and sentiment on the mortgage market is the rhetoric — whatever it may be — that accompanies the rate decision. Many expect to hear that the need for monetary easing may be over, and that further interest rate cut decisions may not be needed in the near future.

Lots of interesting things are happening right now on the mortgage market, and you would do well to pay attention.

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In his remarks on the economy this morning, President Bush did mention the housing market. The New York Times reports on some of what President Bush said about the housing market:

Mr. Bush said he had also urged Congress to pass legislation that would help address problems in the housing market by modernizing the Federal Housing Administration, reforming the Fannie Mae and Freddie Mac loan agencies, and allowing state housing agencies to issue tax free bonds to refinance subprime loans.

Even if Congress did approve the measures put forth, would it really help? It would do nothing to change the perception of debt in this country, and it there’s nothing it could do in terms of the foreclosures that have already taken place. Putting the taxpayer further on the hook for fixing the housing market troubles may not result in overall economic health.

President Bush went on to blame Congress for the current state of the housing market, as well as other aspects of the faltering economy. He did make it a point to tout his tax rebate, and also to avoid the word “recession.”

Energy prices and the economy

President Bush also cited energy prices as a problem for the economy, and mentioned drilling in ANWR and using corn ethanol as solutions. However, Democrats were quick to point out, in their rebuttal, that both of these solutions are not short-enough term to really help the current economy, and that they do not offer practical solutions even for the future.

In the end, it is doubtful that any measures taken now, including the tax rebate, would truly help the economic situation. After all, this is a very large change in the way the economy has been going, and it will take some adjustment.

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Over the weekend, President Bush announced that today will be the first day that tax rebate deposits will go out. This is actually a bit earlier than originally planned. And although it only applies to some of tax rebate direct deposits, others will follow shortly, depending on SSN and when the tax return was filed. Tax rebate checks will start going out soon as well, also early.

Tax rebate: pay down debt

Many Americans are thinking about using the tax rebate to pay down debt. The consumer spending spree that we have been on for the last decade and a half is coming to an end as the subprime mortgage crisis affects credit markets and the economy. And Americans are feeling less secure about their financial situations. All of this conspires against the debt-based economy as consumers start to think that maybe an abundance of easy credit isn’t all its cracked up to be.

Tax rebate: paying for neccessities

The other thing that is popular amongst Americans is planning for the increase in costs to necessities like transportation and food. Food prices are rising and gas prices have household budgets straining. Cheap oil is no longer something to rely on, and that is driving up all sorts of costs.

Rather than being an economic stimulus, this tax rebate is more likely to keep Americans afloat. Will your tax rebate actually be what saves your personal finances from folding under the pressure?

There are many different uses that the coming tax rebate may be used for, but the general consensus is that consumer spending is no longer at the top of the list. After all, there are many more pressing matters that need to be attended to.

What will you use your tax rebate on?

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cheap oil, personal finances, use tax rebate