| Analysis: US mortgage refinancing offers hope of stability
Amid the steady drumbeat of bad news for the US housing market, there are hopes that a recent dramatic fall in mortgage rates could help struggling homeowners refinance into cheaper loans, offering the prospect of much needed stability. But contrary to earlier periods when low mortgage rates prompted waves of refinancing activity, analysts say the silver lining could be tarnished by today's stricter lending standards, virtually closed securitisation markets and still high rates for non-conventional mortgages. All this while the dark cloud of falling house prices casts a shadow over new buyers. “Financing costs may have come down for some, but it would take an extreme optimist to see any break in the price slide," says Alan Ruskin, strategist at RBS Greenwich Capital.
Wayne Swan pledges home loan aid
FEDERAL Treasurer Wayne Swan has promised to find ways to help borrowers more easily switch lenders if they are unhappy with their home loans. All major banks last week ignored warnings from Mr Swan and lifted their variable home rates in response to higher funding costs related to the global credit crunch sparked by the US sub-prime mortgage crisis. The banks acted ahead of any decision to lift official rates by the Reserve Bank of Australia. The RBA next meets on February 5 and is strongly tipped to lift official rates 25 basis points to 7 per cent. The ANZ and St George banks lifted their rates by 0.20 per cent, a move labelled "excessive" by Mr Swan. The Treasurer said he was examining how to make it easier for mortgage holders to refinance.
Savings and loan crisis cost taxpayers too much
Economic bubbles that burst get government bailouts. That's historically the way it's worked. The need to stabilize the farm banking system was given as the reason for the mid-80's farm aid. The savings and loan crisis cost taxpayers far more than deposit insurance could cover. Today, it's the Adjustable Rate Home Mortgage bubble that has burst and the Bush administration is attempting to cushion the blow with a plan to help borrowers refinance. 1.8 million ARMs reset to higher rates this year. The Bush administration worries that as many as 1.2 million of these are at risk of foreclosure without help. As was the case with the 1980's farm crisis, the government's plan doesn't bail out banks directly. The mortgage industry will lose $150-400 billion as a result of subprime mortgage losses.
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