Collapse generating huge future benefit in real estate.
What did EI just say? Benefit?
Correct. Mortgage interest rates are tied directly to the rate on a 10-year Treasury. Although mortgages tend to be 30-year years in length, the average duration is much shorter. Many borrowers are now opting for 15-year mortgages.
Mortgage rates, now back at 40-year lows, will help many borrowers refinance their homes. It may eventually help people buy one of the millions distressed homes in this country. Hopefully, these homeowners will have more skin in the game and loans will be better underwritten than those produced from 2003 to 2007.
One of the major reasons why Treasury rates are so low is the flight to safety caused by the European debt crisis. Employment remains too low. Interest rates will remain low until the world economy begins to pick up. There is very little loan demand. Although mortgages are being refinanced, this does very little for banks. All that is being done is churning of loans.
Low rates will also allow investors to finance distressed assets more cheaply. Initially, I was a little concerned about all the banks in this case who settled for lower rates. Not any more. Their funding costs, generally interest rates on deposits, also remain mucher lower than when the confirmed plan was designed.
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AI
