So the FED cut the key interest rate to .25%... Big deal!

[RADA]

*RADA climbs up on his soap box...


So the Fed cut the key interest rate to .25% to help stimulate the economy.. Big deal, it won't mean a thing to me unless the banks act in kind and cut the prime lending rate by the same ammount. Untill then, it has about as much effect on my life as a dust storm on Mars...

If a bank were to cut it's lending/refinance rate to say 4.0% for a 30yr fixed home loan I'd be the 1st one line the next day, even though we haven't made a single payment on our new house (1st payment due Jan 4th). We're currently at 5.5%, and a drop to 4.0% would save us $251/mo. This equates to a savings of over $90K in interest over the life of our loan...

Yes, I know the lending rate for mortgages isn't directly tied to the Fed's key rate. But banks can adjust their rate accordingly. If the banks are going to stay greedy then they deserve whatever befalls them...

*RADA gets down off his soap box..

[Lincoln]

We feel your pain. The ICHQ mortgage is ri-****ing-diculous.

[Winfrey]

I prefer regoddamndiculous. But I suppose it doesn't hurt to diversify.

[Nomad]

$90,000 going into the pockets of every homeowner's pocket would do dick for the economy.

[airbornflght]

Yeh. The big deal here is it is going to lower the federal funds rate and allow banks to both borrow money from each other and from the fed at a lower rate.

Also, the fed lowering interest rates is small compared to the fact that they are now going to be buying securities and other things.

What they are attempting to do is to lower the money supply which will hopefully raise inflation. I think they fear we are slipping into deflation.

[Winfrey]

regoddamndiculous

[Lincoln]

pockets of every homeowner's pocket
wut.

[Snarkasm]

I do, actually, have a pocket inside my pocket. I think it's for change or other stuff you don't want rattling around.

[RADA]

$90,000 going into the pockets of every homeowner's pocket would do dick for the economy.

I completely disagree.

If I had a extra $90k I have at least $40k worth of "stuff" I want to do around our house. I further disagree with your statement that if I, plus every other home owner in the country had an extra $90K to spend or save, the economy would be doing exponentially better..

Average of 65 million homeowners in the US X $90K

65,000,000 x $90,000 = $5.85 × 10 to the 12th power. Even if only 40% was put back into the economy, the recovery would be amazing...

[MrBill]

$90k would pay off my mortgage and provide me with more disposable income to spend on the open economy. Where does the line start? :)

[Leonardo]

What they are attempting to do is to lower the money supply which will hopefully raise inflation.An increased money supply is a major factor for increased inflation. You've got it backwards.

[McBain]

$90,000 going into the pockets of every homeowner's pocket would do dick for the economy.

Sounds like a stirring the pot reply to me...

[BLuKnight]

I almost refinanced my mortgage when rates got down to 5.5% two weeks ago. Yesterday, they dropped to 5%. I'm holding out for 4%.

[Leonardo]

I am considering a refinance as well.

[BLuKnight]

The main issue is that we'd need to roll all the refi charges into the new loan because we just don't have that kind of money. Additionally, I'd need to start paying PMI. Right now, it's tax deductible. However, that's only through 2011. After that, who knows.

[NiGHTS]

Printing $90K for every US citizen would torpedo the dollar. Your $40K of home touchups would buy 2 loaves of bread and a gallon of milk.

[Nomad]

I completely disagree.

If I had a extra $90k I have at least $40k worth of "stuff" I want to do around our house. I further disagree with your statement that if I, plus every other home owner in the country had an extra $90K to spend or save, the economy would be doing exponentially better..

Average of 65 million homeowners in the US X $90K

65,000,000 x $90,000 = $5.85 × 10 to the 12th power. Even if only 40% was put back into the economy, the recovery would be amazing...

That money is already in the economy, it's just locked into the housing market. It's not giving money, it's simply taking less away. People don't tend to spend money rebated like that. Chiefly because they don't get it all in a lump sum, it comes over such a long period of time it means nothing. If people were to get $90,000 outright and spend, it tanks your dollar and increases inflation.

$90k would pay off my mortgage and provide me with more disposable income to spend on the open economy. Where does the line start? :)

Like I said, you're not getting $90,000. You're getting $200 a month for the next thirty years, it doesn't do anything for an economy now and is too small scale.

[MiracleManS]

I might be entirely unique, but an extra $200/mo would be spent by me pretty much every month on something. So I'm not sure how me having extra money to dump into places besides a mortgage is a bad thing...

Not suggesting it's going to fix everything, but I'm pretty sure it wouldn't hurt.

[RADA]

That money is already in the economy, it's just locked into the housing market. It's not giving money, it's simply taking less away. People don't tend to spend money rebated like that. Chiefly because they don't get it all in a lump sum, it comes over such a long period of time it means nothing. If people were to get $90,000 outright and spend, it tanks your dollar and increases inflation.

Like I said, you're not getting $90,000. You're getting $200 a month for the next thirty years, it doesn't do anything for an economy now and is too small scale.



You're wrong. This money is not locked into the housing market. If I can refinance my home at 4% or less it drops our mortgage payment by over $250 a month. At 3.75% I save $291/mo. My wife and I want to install a privacy fence, pool and landscaping in our back yard. Our estimated costs are around $40K. Since we just bought a house appraised at $493K for $278K I know the home equity is there even if our house loses another 25% of it's value. Furthermore, the $40K home equity loan we take out will be at an even lower rate than our home loan. Think of all the persons we'll be hiring to work on our home to make these improvements. That's what stimulates the economy, along with every Joe Homeowner that has an extra $250 a month in their pocket. $250/mo is a LOT of "found money". That's like getting $3K raise!

You've also got a lot of home owners that have higher interest rates than us. An Air Force friend of mine in Tucson is planning to refinance if rates drop to 4% or less. He's at 6.5% right now. His mortgage payment will drop from $1260 to around $850!! That's a $400/mo savings or $4800 for the year! How can this not make sense to you? If he spends 25% of that on "stuff" he helps a guy at Best Buy keep his job, or a girl at Starbucks can afford to go to college... The power of the consumer is amazing, and mostly overlooked.

Will everyone qualify for a refi, with all the new loan regulations? Nope, but some will, and that's what counts. Our economy is not controlled by the BIG monster companies, it's controlled by Joe and Jane Consumer the world over. It's the buying power of 235M+- people in the US alone that says whether the economy works of fails. So I say again you're theory is flawed, because you're thinking on an individual scale, not on a national scale. If I have an extra $3000/yr in disposable income, you can bet I'm going to spend some, invest some (Ooo another way to help the economy recover), and save some. If 25% of the other 65M US homeowners follow this same plan and spend a third of whatever the difference between their old and new payment, it would turn around the economy..

[Khaos]

An increased money supply is a major factor for increased inflation. You've got it backwards.
Actually he had it exactly right. The Fed is terrified of deflation right now because we import so heavily. As dangerous as inflation can be, deflation in our situation is a death trap. We would literally implode under the weight of a weak dollar because we would not be able to print money fast enough to import anything. In the same manner, China would literally implode under the weight of a strong Chinese Yen because they rely so heavily on the value of their exports being exaggerated by the exchange rate of their currency. Americans gladly pay $10 for a cheap, worthless product that cost $0.05 to manufacture in China, $1.00 to ship on a container.. ship.. and then sells for 500 Chinese Yen here in the U.S......

Okay, I'm exaggerating the numbers but the point is a valid one. We cannot afford deflation. Our economy goes woooosh if that happens. That's why the Fed is so interested in giving away money, and that's why China lights the stuff on fire when they find they have too much of it in circulation.

[Nomad]

You're wrong. This money is not locked into the housing market. If I can refinance my home at 4% or less it drops our mortgage payment by over $250 a month. At 3.75% I save $291/mo. My wife and I want to install a privacy fence, pool and landscaping in our back yard. Our estimated costs are around $40K. Since we just bought a house appraised at $493K for $278K I know the home equity is there even if our house loses another 25% of it's value. Furthermore, the $40K home equity loan we take out will be at an even lower rate than our home loan. Think of all the persons we'll be hiring to work on our home to make these improvements. That's what stimulates the economy, along with every Joe Homeowner that has an extra $250 a month in their pocket. $250/mo is a LOT of "found money". That's like getting $3K raise!

This is a fairly basic concept that I was trying to explain:

If you have $100 and are paying $50 of it to a tax, but I send you a check for $10, you'll be more likely to spend that $10 than if I simply only taxed $40 and you were left with that extra $10.

In this situation, people tend to save money that is not taken away from them, even if you multiply this figure significantly to reach your estimate of $250 a month.

Further, with the economy on the down, home improvement follows because it doesn't do much for your home's overall value. Simple procedures like a bathroom or kitchen flip are doing less and less to increase a home's value these days. People tend to do such improvements when trying to sell a home... Which basically aren't selling right now anyhow.


That's a $400/mo savings or $4800 for the year! How can this not make sense to you? If he spends 25% of that on "stuff" he helps a guy at Best Buy keep his job, or a girl at Starbucks can afford to go to college... The power of the consumer is amazing, and mostly overlooked.

Right, but again see above. Even if he spent half of that, it's a pittance to the global economy. Even if you multiply it by however many that could qualify and get refinancing right now. More so, we are now comparing apples to oranges. Refinancing is different than the government sending out $90,000 checks, which I pointed out first.

Will everyone qualify for a refi, with all the new loan regulations? Nope, but some will, and that's what counts.

Well, all twelve of you who have immaculate credit enjoy your savings.

Our economy is not controlled by the BIG monster companies, it's controlled by Joe and Jane Consumer the world over. It's the buying power of 235M+- people in the US alone that says whether the economy works of fails.

Consumers are half the equation, they give corporations and banks power. They've made silly decisions that hurt themselves and the consumer, that doesn't mean the consumer can entirely rectify the situation.

So I say again you're theory is flawed, because you're thinking on an individual scale, not on a national scale. If I have an extra $3000/yr in disposable income, you can bet I'm going to spend some, invest some (Ooo another way to help the economy recover), and save some. If 25% of the other 65M US homeowners follow this same plan and spend a third of whatever the difference between their old and new payment, it would turn around the economy..

I doubt 25% of homeowners could refinance like that, considering upwards of 70% of Americans live paycheck to paycheck and lending is tight.

[Leonardo]

Well, all twelve of you who have immaculate credit enjoy your savings.Believe it or not, there is a sizable part of the population that does watch their expenditures, that does put their necessities above luxury, that does brown-bag their lunch, that does buy a modest car, that does make a home down payment and buy 1000 square feet less than they could afford. This segment of the population does not make the news because it does not bleed, therefor does not lead.

I in no way am casting aspersions at anyone who has genuinely been shafted by the economic upheavals of the past 18 months, due to no fault of their own. I am though shaking my head in pity, not sympathy, for those who have continually charged anything and everything on their credit cards as long as they had a limit left, who bought the huge house on a less than huge income, and who spent thousands on the latest cars when their 'old' car worked perfectly.

To those who were let down by their primary school 'education' and couldn't perform basic math when they signed their mortgage papers, I have sympathy. For those who lost their jobs due to no fault of their own, I have sympathy. For those who finished college and are still buried in student loans, I have sympathy.

[Khaos]

There are lots of ways to end up with piss-poor credit. Simple ignorance being chief among them.

For example: Nobody ever taught me about credit when I was young. I naively thought that if I did not borrow any money or get any credit cards, I would not jeopardize my credit score. As a teenager I scraped by and moved around a lot. Times were tough. Many years later, I actually took an interest in researching credit and building credit. When I went to get a starter credit card, I was rejected. It turned out that my credit score was under 350 and I had never borrowed a cent from anyone.

What happened was that I skipped out on an apartment lease because I had lost my job, times were tough (2001 crash, anyone?) and I simply couldn't afford the place. I suppose as retaliation, the apartment complex billed me over $5,000 for carpets, paint, kitchen cabinets and god knows what else. None of it was necessary, but I never even received a bill to dispute it because I had moved across the country is search of greener pastures.

Well, it's six years after the fact now... And guess what? On my credit report I still owe some stupid apartment complex in Dallas almost six dimes. I tried to dispute it, but they have "witnesses" and I don't have a shred of documentation or evidence to back up my story. It got thrown out.

Now I make good money... Hell I have a brokerage account worth tens of thousands, but I still can't get even a credit card with a limit over $200 nevermind a loan for a house. I am stuck renting for the next four years until this stuff leaves my credit report.

Please tell me our system isn't jacked up when almost any company can completely abuse the system by filing sums with collection agencies for "services provided" which then impact someone's credit report as much as 15 years after the fact (due to untimely reporting).

This is the opposite of justice. Creditors assume everyone is guilty until proven innocent, and it's a witch trial out there. Literally anyone can cry witch and you're hung out to dry.

[Leonardo]

Khaos, my unstated point was that I believe the majority, certainly not all, individuals with poor credit scores earned those scores. Yes, there are definitely flaws in the system. If your identity is stolen, it can take months or years to get records repaired.