Part of the federal government’s plan to stimulate home sales has been to bring mortgage rates down. It is not working.
The Mortgage Bankers Association reports that 30-year fixed mortgage rates are still dropping and hit 5.19% last week, so the effort to get interest rates lower has been successful, but that is where it ends.
The MBA says that applications for mortgages made the week ending February 6 were 24.5% lower than the week before. The drop from the same week a year ago was 43.9%.
The government may have an effective way to decrease mortgage rates, but it has still no conquered two other problems. The first is that banks do not want to lend to anyone other than the most credit-worthy applicants. The second is that no one sees a bottom to housing prices. Buyers don’t want to see their new homes drop another 10% in the next year.
Getting low-rate mortgages into the market as a single solution won’t do anything at all to improve the housing disaster. It’s a table with only one leg.
Douglas A. McIntyre
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