Magazine article Mortgage Banking

Unbelievable Rates. (Portfolio)

Magazine article Mortgage Banking

Unbelievable Rates. (Portfolio)

Article excerpt

ARE LOW RATES A TREND OR JUST A SHORT-TERM BLESSING? IT'S HARD TO KNOW, really--but the bond market has definitely been the beneficiary of a lousy stock market. And real estate markets have been the beneficiary of a happy bond market. If that sour stock market stays around for a while and the bond market becomes a longer-term safe haven in times of saber-rattling, then low rates could be a trend. And a very nice trend for mortgage lenders and consumers. Amazing inroads in U.S. productivity and global competition for goods and services have tamed inflation, leaving the Federal Reserve a lot of room to maneuver. That could be the foundation for a period of low rates that tests lenders' ability to handle high volume and retain their borrowers.

How important a trend could bargain-basement rates be? Well, this year and last, they've been important enough to trigger record originations in residential finance, record mortgage industry employment, active refinancing in commercial property markets and a very healthy home-purchase market. Many feel rates have to rise next year as the long-awaited recovery starts to blossom. That Will trim originations substantially, as refinancing activity subsides and cash-out activity abates. …

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