Fed cuts fail to lower 30-year mortgage rates
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30 yr mortgage rates, fed cuts March 19th, 2008They remain roughly where they were a year ago amid banks’ wariness about making loans.
The Federal Reserve has been slashing short-term interest rates since August with precious little effect on the one that matters most to homeowners and home buyers: the 30-year fixed mortgage rate.
That rate is roughly where it was a year ago, while the discount rate, which is what banks pay to borrow directly from the central bank, is 4 percentage points lower. The Fed’s opening of the spigot of cheaper money is supposed to spur across-the-board spending and economic growth, reversing the tide of recession, but bankers have in effect put a knot in the hose.
“Right now, the banks are holding back this flood of cash,” said Keith Gumbinger, vice president of HSH Associates, a rate-tracking firm in Pompton Plains, N.J. “They are letting money go out only in a trickle, when they could be letting it out with a great flood.”
The short-term rate cutting has helped pull down certain longer-term rates — including the rate on the 10-year Treasury note, traditionally the benchmark for 30-year fixed-rate mortgages. But those mortgages are still expensive because banks are skittish about making home loans in the wake of the sub-prime mortgage meltdown and amid rising delinquencies and declining home prices.
The rate for a traditional 30-year fixed-rate mortgage was 6.39% as of March 12, according to BankRate.com’s weekly national survey, compared with 6.22% a year earlier.
Tags: 30 yr mortgage rates, fed cuts
