Banks Benefit, Not Homeowners

Not that interest rates aren’t low enough but they could be lower.  Not only did they cause a wider margin between yields, banks also were very quick to pass on the losses in mortgage-backed securities on any given day than they were when mortgage bonds improved.  This made if very hard to advise a client on whether to float a rate or lock it in.  Even though we felt confident economic data would cause mortgage bonds to rally there was no telling whether we would get that improvement in our rate sheets or not. 

Banks argue that they had to offset higher costs.  I don’t doubt that they did but that also happened due to a lot of the big banks poor lending decisions.  I am sure many more would have refinanced, putting more money in their pockets, which in turn could have increased spending.  Who knows too, it could have increased the amount of people who could have bought.  There isn’t much that can be done about it at this point but…….

“From 2000 through 2008, that margin averaged 0.73 of a percentage point, according to data from Barclays Capital. But in 2009, the average was a much wider 0.98 of a percentage point.”

http://online.wsj.com/article/SB10001424052748704363504575003292596304822.html?mod=rss_Heard_on_the_Street