Schizo Market - UK Raises Mortgage Rates - US Drops them
If you thought the mortgage industry was crazy well you are probably right. You need look no further than a comparison between the United States and United Kingdom mortgage industry markets. In the United States mortgage rates dropped slightly on 30 year fixed-rate mortgages last week coming up after several drops in interest rates by the Federal Reserve to the bank that actually make the mortgages happen for consumers. After the feds dropped a total of about two points, borrowers are benefiting with about a half point mortgage rate dropped so far.
In the United Kingdom things are much different. Thanks there do not have the support of the central bank, and the credit crisis there is forcing banks to raise their mortgage interest rates to borrowers in order to deter people from taking mortgages out at all. If you are shopping for a new home in the United Kingdom and you have 10% or less to put down of the home, you will be looking at an interest rate above 7%. The banks don’t want to take any risk at all the United Kingdom right now especially as the number of banks face the potential of bankruptcy.
In the United States the Federal Reserve is loaning money directly to the investment houses that secure mortgages and it helped to bail out and raise caps for Fannie Mae. It remains to be seen which method will stand the test of time. The bail out method of the United States or the free-market method of United Kingdom. In some ways this is kind of like watching a schizophrenic on a diet, one minute eating cheeseburgers and the next minute they’re popping weight loss pills.
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