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The fed may have wanted to bail out the little guy but it’s looking increasingly like they’ve just bailed out Wall Street. In the US, where most mortgages are on fixed rates it is long term bond yields which matter
Americans may be disappointed that the Federal Reserve’s interest rate cut won’t translate into lower monthly mortgage payments and a revival of the housing market.
Mortgage rates won't stimulate demand,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. The Fed may be a little impotent here because what caused this housing crash was overpriced housing, not mortgages.‘’
The average 30-year fixed mortgage rose 0.01 of a percentage point to 5.95 percent on Sept. 21, according to North Palm Beach, Florida-based
Bankrate.com’s survey of banks and lenders in the 50 U.S. states. It peaked this year at 6.42 percent on June 14, Bankrate.com said.
The housing industry, now in the second year of its worst recession since 1991, erased 0.6 percent from gross domestic product in the second quarter. Home prices probably will fall on a year-over-year basis for the first time since the Great Depression of the 1930s, Anderson said.
Investors concerned about inflation following the Fed’s half-point interest rate cut have driven up the yield of 10-year Treasury notes by 23 basis points, or 0.23 of a percentage point, to 4.7 percent. The increase has dashed hopes that lower home-loan costs might entice more Americans to overcome their fear of falling prices and buy homes.