Mortgage Rate News

Originally, the housing market crisis seemed limited to subprime loans and to those who made imprudent choices when buying homes. Now, though, the ripples are spreading. The housing market crisis has affected the credit market and brought down once untouchable Wall Street institutions. And today, with the announcement that Citi is planning to cut around 53,000 jobs, it is becoming evident that a vicious cycle is in place.

Unemployment and foreclosures

The subprime lending crisis has brought things to a point where the next homeowners to be affected are those who bought homes that they could afford. This is because with unemployment on the rise, it is obvious that more and more people are going to be finding it hard to make ends meet in the coming weeks and months. People are losing their jobs, and that means household budgets are about to be seriously tested. If you are in this camp, it is more important than ever to prepare for the future so that you can make your mortgage payments.

If you are worried about your job (or even if you are not), it is a good idea to do what you can now to prepare. The three most important things you can do right now are:

1. Adjust your spending to reduce unnecessary expenditures.
2. Save up some money in an emergency fund.
3. Try to pay down some of your debt.

And do it in that order. Follow a logical progression of steps to get your financial house as much in order as you can, as quickly as you can. You need to do what you can to adjust your personal finance situation to the times. If you act prudently now, you may be able to stave off problems later. And, more importantly, taking proper steps to protect yourself now can help you avoid foreclosure — even if you do lose your job.

Even though we have yet to be declared in a “technical” recession, there are experts and analysts from around the globe insisting that the developed world — including the U.S. — is in a recession. The Organization for Economic Cooperation and Development (OECD) is also reporting that this is the first time in more than 30 years that Europe, Japan and the U.S. are all in recession during the same year.

It appears that the ripples that started with the subprime lending crash last year are spreading ever further. CNN Money reports on the global recession:

“The OECD area economy appears to have entered recession,” said Jorgen Elmeskov, director of the policy studies branch and the OECD’s economics department. He said that while the picture was uncertain “projections point to a protracted downturn” with recovery not likely before the second half of next year, with the U.S. leading the way out of recession.

It is somewhat reassuring for some that the United States is expected to lead the global economy out of its funk. Although it only makes sense, since the U.S. was the first to really show signs of the economic trouble.

In order for the U.S. to be able to lead the world out of this global recession, however, a few things have to happen:

1. Housing market needs to stabilize. The housing market needs to stabilize and foreclosures need to be prevented. However, it is only fair that as the government helps those that might not have made the best decisions, that others are helped as well. If stimulating spending is the way the government wants to get us out of this mess, providing those who are not in trouble, but who have onerous terms, with refinancing can open the way for more disposable income — and more spending.
2. Restore confidence in the market. Right now, there is not a whole lot of confidence in the market. Some sensible regulations may go toward creating a sense that people can trust investments again. Of course, companies will need to be propped up.

Of course, both of these assume that we need to avoid a depression at all costs, and that spending more money is the answer.

Do you think spending more is the answer?

Lending rates are falling right now, and this is good news. Indeed, today’s Election Day is bringing all sorts of good news to the people of the United States. There are indications that banks are starting to lend to each other again, and that could mean that at some point they’ll start lending to the rest of us. CNN Money reports on the drop in lending rates:

A number of U.S. programs aimed at easing funding concerns for banks and encouraging lending between financial institutions have also helped lower Libor rates. Such initiatives include lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts.

As rates fell, two key indicators of risk sentiment showed that confidence in the market was improving, but credit still remains tight.

Credit remains tight; credit cards set to cause next leg of crisis

Despite some optimism over the falling lending rates, things may not turn out rosy. The next leg of the financial crisis is expected to be credit cards. Companies are seeing an increase in credit card defaults, and that could lead to a whole new round of problems for the credit market — and for consumers looking to use credit to ease cash flow in these tough economic times.

And, unfortunately, the short-term lending rates do not have much impact on long-term rates, like mortgage loans. So mortgage interest rates are still somewhat high, comparatively speaking. And the tighter credit requirements, combined with home values that are still low, are not helping those trying to get second home mortgage loans.

Election Day: Get out and vote

While the next president’s effects on the economy — and even on the housing market — will be limited, whether we have John McCain or Barack Obama will make some difference in the policies that are enacted. Today is your chance to get out and vote for the person that you think will best be able to handle this crisis and get us back on track.