Lower mortgage rates not getting passed on to homebuyers
Posted on December 18, 2008 at 1:07 pmVia Bloomberg:
While the average rate on a fixed 30-year mortgage fell to 5.18 percent last week from 6.47 percent in October, according to Mortgage Bankers Association data, the historical relationship between home loans and mortgage bonds shows rates should be at least half a percentage point lower. Though the U.S. is paying nothing to borrow in some cases, homebuyers are paying about $730 more a year than they would otherwise on a $200,000 mortgage.
The demise of lenders including Countrywide Financial Corp. of Calabasas, California, and Seattle-based Washington Mutual Inc. reduced competition as refinancings soar. At the same time, surviving mortgage banks face a credit crunch that limits their lending ability, industry officials say.
“Lenders have raised their prices over the last few weeks because of capacity concerns amid all this additional business,” said Brian Simon, chief operating officer at Freedom Mortgage Corp. The Mount Laurel, New Jersey-based firm is among the five biggest independent mortgage companies.
