Sunday Interest Rate Roundup

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You know the headline: The Fed held rates steady, and mortgage rates continued to back up just a tiny bit -- Freddie Mac’s average for 30-year fixed rates is 6.67%. Our favorite Fed-watchers spent the week in gloomy moods, worrying about further subprime fallout.

Bloomberg’s Caroline Baum says the subprime mess is beginning to remind her of the savings and loan crisis: ‘Subprime delinquencies may cause problems for everyone from potential home buyers to small investors to the Federal Reserve to the man on the street. It’s something everyone should care about.’

At Inman News, Lou Barnes (subscription required) sees trouble, trouble, everywhere. If housing prices fall? ‘That would extinguish the equity in another 15% of households beyond the 15% that have little or none now,’ and that means more foreclosures. The next shoe to drop on Wall Street: ‘S&P and Moody’s are soon to be exposed in the worst systemic rating error ever. They are going to have to re-rate hundreds of billions of new-age mortgage paper....’ That would be bad news for the investors who support the mortgage industry.

Pimco’s Bill Gross is also worried about subprime fallout: ‘Currently 7% of subprime loans are in default. The percentage will grow and grow like a weed in your backyard tomato patch.’ Gross predicts the next Fed move is a cut in rates sometime in the next six months.

At Bankrate.com, Fed blogger Greg McBride sees no evidence the Fed is about to act: ‘The Fed is on the sidelines and not with their helmets on, chinstraps buckled, waiting to go in the game. They’re on the bench sipping on some Gatorade.’

Comments? Thoughts? Who is your favorite Fed-watcher, and what are they saying?
Photo Credit: Ben Bernanke by Reuters