American's have been told that bank bailouts, the government's take over of Fannie Mae and Freddie Mac, raising the conforming loan limit from $417,000 to $729,750, lowering the prime rate and other "stimulus" is going to help the struggling home owner on Main Street. Hundreds of billions of dollars in relief has been given to the banking and mortgage industries, yet mortgage rates continue to go up.
The 30-year fixed-rate mortgage averaged 6.46% on a national basis for the week ending Oct. 30, up from 6.04% last week and 6.26% a year ago. Actual rates for jumbo loan refinancing (which banks are still considering as anything over the old limit of $417,000) are still over 7.5%. And the LIBOR rate - which many adjustable loans are tied - still remains high.
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.