4% Mortgages Rates for Everyone!
Of the many ideas being floated regarding fixing the economy, my favorite of late, is the chorus of voices calling for a reduction on every one’s mortgage interest rate to under five percent.
Of course the devil is in the details and the likelihood of that actually happening is well – I suppose on a daily basis we are seeing the improbable transpire so it’s a theoretical possibility. The full article can be found here:
Would you go for a 40-year mortgage at a fixed 4 percent rate? Some high-profile television money personalities — Jim Cramer and Suze Orman — have been talking it up and generating a popular response.
“My thoughts were and are that if interest rates could come down to about 4 percent across the board — for everyone — that could start to stimulate the real estate market,” Orman said in an e-mail to ABC News. “For many, it may mean that they can keep their homes.”
Four percent interest, eh? Right now — if you qualify — you can, on average, get a 30-year mortgage at a fixed rate of about 5.3 percent. That means you would have a monthly payment of about $1,110, on a $200,000 loan. If you could get a 40-year mortgage at 4 percent, the monthly payment would be about $836. Both figures leave out property taxes, insurance and other possible fees.
Cramer, on his “Mad Money” show on CNBC last week, said the reduced payments could make a big difference for many homeowners.
It is funny to see it twisted a bit, but I blogged a couple of months ago for the government to borrow in the treasury market at 2.5-3% and lend out in mortgages at 4%. I sent it to Cramer with creative commons released to him to use. He did a show on real estate the next day. My idea was for buyers of homes not refi at the time. It seemed important to get the homes off the market and get the loans paid off to the holding banks/investors. This would ulitmately capitalize the banks. I also felt if it was done fast enough it would be no cost to government and tax payers because there was a spread. Unfortunately the government had many other ideas. President Obama and Congress has added many thing to the budget, the stimulus and bailout. This over zealous group might have over done it. Our treasury investors are backing up rates because of the huge borrowing and what the money is going for. China and the Oil Producers who buy many of our bonds, a looking for better returns if the money is not all for the goal of solving the problem. Also it is fiscally irresponsible.
Richard Stabile Bergen County Real Estate at March 11th, 2009 at 2:53 am ( )I have to admit to have the government cover enough borrowing to redo everyone’s mortgage is a little out of hand.
Yeah, without knowing AT ALL how they would go about doing it or what the true cost would be, I must say I like the idea, in theory. However, what comes to mind is ‘no good deed goes unpunished’. Meaning in all likelihood there would be unintended/unanticipated consequences (fiscal feasibility aside).
Interesting comments thanks for piping up.
Meredith Martin at March 11th, 2009 at 4:53 am ( )