Mortgage rates are falling, and other media myths

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Good morning, Eli Manning. True or false quiz: The Federal Reserve’s historic slashing of interest rates means lower mortgage rates for home buyers.

False, says my favorite mortgage broker/pundit, Lou Barnes, who wrote at the end of last week, ‘Contrary to the conviction of deeply confused civilians and reports by lazy news media, mortgage rates are unchanged, about 5.75% for the lowest-fee 30-year paper.’

I think Lou just called me lazy, but I will soldier on. He wrote last Friday, ‘Yesterday’s ‘5.68% plus .4% origination’ is ... all but identical to the prior week’s ‘5.69% plus .5%.’ Yet, the media refer constantly to ‘dramatically lower mortgage rates.’ They are better, but... drama? Freddie’s average for the whole of 2007 was 6.34%. A half-percent drop is nice for buyers, and a help to a few refinancers, but no fire sale.’

His point is that the Fed has been unable to convince investors that low rates are here to stay. Further, he argues, this is not a problem the Fed can solve on its own anyway: ‘I have chewed on the Fed for its inaction and credit-wreck oblivion. However, this situation is NOT a monetary problem: It is a banking-system near-insolvency that may morph into a recession, each making the other worse. The crying need for six months has been transparency of credit loss and bad-asset firewall. Cuts in the overnight cost of money may intercept recession, but inflation means that the these cuts cannot be maintained or removed at a measured pace.’

Thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
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