For those who watch mortgage market closely have noticed that mortgage rates have actually risen slightly after of few of the recent Fed rate drops. Why? The rates that the Federal Reserve has been lowering are the rates at which banks borrow money. In a simple world, if the bank has access to cheaper funds that should mean that it trickles down to the consumers and drives down our cost to access funds in the form of loans. The mortgage market is much more complicated than that with access to funds, and the rates, driven mostly by Wall Street and their demand to buy and sell mortgage backed securities. This demand still remains low largely due to the still existing issues around declining home values and the still rising delinquency and foreclosure rates.
So, if the drop in rates by the Fed isn’t going to help the current mortgage and housing climate, what will?
The best answer is "Time". At some point the inventory of houses will begin to shrink and home values will stabilize and the housing market will begin to recover.
The silver lining? For those people who have equity in their homes – either from buying at a low point or paying down the principal balance faster – or cash to put down on a home there are a lot of bargains in the market to be had.
