spreads increasing

Isnt it interesting - if you read the newspapers - all you see are doom and gloom headlines.
Subprime this, subprime that - writeoffs, job layoffs, slow down - all the words that cause people to 'turtle' - pull in their feet and huddle in their homes...a slow down is coming - it will be self fulfilling.
but as i look at the market an interesting phenomena is unfolding
the 5 year govt bond rate is approx 3.4% and the discounted 5 year mortgage rate is just shy of 6% - this is a spread of 2.6%
this tells me lenders are making huge profits - they say money is hard to get - and they have to pay higher yields to investors - but i dont see it my world - traditionally the spread should be approx 1.6% so i would think 5 year money should in the range of 5%...will lenders drop rates ?
I dont thinks so - they will drop the prime rate (variable or floating rates) and keep the fixed rates high.. then when the floating rates move up - people will panic and jump to the higher fixed rates..i saw this before in the 80's...what goes around comes around...

greygoose out.....

HAPPY NEW YEAR - 2008

2008 - wow how time flies - this June will mark my 30th anniversary in the mortgage market. Times sure have changed - and unfortunately now, the consumer is being told to use mortgage brokers then go back to their institutions for matching - this is frustrating since we do the work and the lender - knows its approved so they match the rate and scoop the file. It would appear that simple common decency is disappearing in our society - certainly a shame.
In any event - rates rose prior to Christmas on the fixed side from 5.79-to as high as 6.14 for 5 year money. Is this to slow the Christmas rush and allow lenders to drop rates back to where they were and look like heroes in the new year ....??? time will tell.
gold is skyrocketing - oil is skyrocketing the US dollar is sinking - nothing lasts forever but dont stand in the way of a runaway train. If you have debt call us to reifnance, lower payments and batten down the hatches - now is the time to plan to reduce your debt levels

greygoose out.........