| Banks See Spike In Refinancing Applications
MADISON, Wis. -- Refinancing applications have surged 17 percent after interest rates dropped three-quarters of a point in the past week -- and they could go lower. VIDEO: Watch The Report But financial experts said it is important to know when it's best to refinance and if the type of loan a consumer has is even affected by this week's federal rate cut. Don Bertucci, AnchorBank's senior vice president of residential lending, said the last few days have been hectic. He said the phones have been ringing and the online applications have been coming in, all in response to this week's rate cut by the federal reserve. So, what does the 0.75 percent rate cut mean for residents? "It would affect mostly second mortgages or home equity lines of credit, where the rate is adjustable," Bertucci said.
Ready To Consolidate That Debt?
IF YOU'RE A homeowner saddled with debt (and we're talking about bad, high-interest debt like the kind you pile up on credit cards) then Alan Greenspan has offered you an escape route. How so? Well, while credit-card interest rates have become increasingly immune to Fed rate cuts (with the average fixed-rate credit card now charging 13.5%), home-equity lines of credit, or HELOCs, have fallen below 4.0%. That's one of the lowest rates we've seen since these products first became popular back in the mid-1980s. And better yet, that rate is before you consider the tax break on your interest payments. Indeed, from a pure number-crunching perspective, consolidating high-interest, nondeductible debt into a HELOC or a home-equity loan, or HEL, is a no-brainer. Of course, your home is the collateral for such a loan, and foreclosure could leave you bunking down in Mom's den.
Not So Benign Neglect
At $213bn, y-t-d Home Equity ABS sales are 51% off last year's pace. Year-to-date US CDO issuance of $274 billion is running 2% below 2006 sales. Fed Foreign Holdings of Treasury, Agency Debt last week (ended 10/10) increased $5.5bn, surpassing $2.0 TN for the first time. "Custody holdings" were up $252bn y-t-d (18.2% annualized) and $317bn during the past year, or 18.8%. Federal Reserve Credit last week declined $3.3bn to $858.3bn. Fed Credit has increased $6.1bn y-t-d and $27.2bn over the past year (3.3%). International reserve assets (excluding gold) - as accumulated by Bloomberg's Alex Tanzi - were up $1.050 TN y-t-d (28% annualized) and $1.189 TN year-over-year (25.4%) to a record $5.861 TN. Credit Market Dislocation Watch: October 10 - Financial Times (Saskia Scholtes): "Banks and investors are still struggling to value mortgage securities backed by subprime home loans more than four months after valuation disputes came to light...
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