First time buyers could receive a $7,500 tax credit if they purchase soon.
NEW YORK (CNNMoney.com) — If you’re thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that’s now before Congress.
Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week. Full Story.
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The 2009 economy and your wallet
The new president’s first job will be to repair a badly broken economy. Here’s how he’ll take on the four biggest challenges – and what that means for you.
By Janice Revell, Money Magazine senior writer
Last Updated: January 13, 2009: 8:52 AM ET
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Low rates not enough?
CNNMoney: Mortgage applications dip despite low rates
NEW YORK (Reuters) – Applications for U.S. residential mortgages slipped from lofty levels last week as homeowners slowed refinancings ahead of expected federal action to lower housing costs, an industry group said on Wednesday.
The real story.
CNNMoney: Credit 2008: Year of the freeze
If the story of 2008 was the government’s unprecedented multi-trillion dollar bailouts of the financial sector, then the credit market was the story behind the story.
The issue of credit moved to the forefront in the past year, as the typically benign market exploded into crisis-mode, and nervous investors bought up historical amounts of safe government debt. It was a year of violent changes in borrowing rates and lending behavior, guided by countless government programs aimed at easing credit for corporate America, banks and consumers.
The so-called credit crunch began after the subprime meltdown of late 2007. High-risk loans on banks’ balance sheets became almost worthless, and as banks were forced to take large writedowns on these so-called “toxic assets,” they became less likely to lend, unwilling to take on more risk.
For much of the year, financial institutions were in a quandary. They had difficulty acquiring loans and at the same time resisted issuing loans. The credit crunch made everything from financing payrolls to getting car, student and home loans difficult for businesses and borrowers.
Then, after the credit situation started to improve somewhat in the summer, Lehman Brothers’ epic collapse on Sept. 15 marked a stunning turning point in the financial markets from which Wall Street is still recovering.
Within two days, overnight Libor, a key interbank lending rate, soared to an 8-month high of 3.06%. Within a week, the market for commercial paper, a key form of business lending, had shrunk to a 2-1/2 year low of $1.7 trillion. And within 10-days, two key measures of risk sentiment – the Libor-OIS spread and the TED spread – were at all-time highs.
However, as the year comes to a close, there are signs that the credit environment has been slowly improving.
Borrowing rates fell from historical highs to all-time lows: the 3-month Libor has dropped from a 2008 high of 4.82% to 1.42% on Dec. 31. And the overnight Libor rate has plunged from an all-time high of 6.88% on Sept. 30 to 0.14% at the end of the year – just 0.03 percentage points higher than the all-time low set a week ago.
Meanwhile, the “TED spread,” a measure of banks’ willingness to lend, slipped to 1.34 percentage points Wednesday – below where the measure stood just before Lehman’s collapse.
But most economists believe it’s still a long road to recovery. Though many of the bailouts have reduced borrowing and costs, all the lending facilities and liquidity programs in the world won’t encourage private lending on their own. Many have said the Fed can only push on a string.
Alan Greenspan, the former Fed chief, has said that we will know the credit markets have returned to normal when the Libor-OIS spread returns to just a hair above the anticipated Fed funds rate. That will show that banks are confident about the market conditions and have resumed normal lending practices. Libor-OIS was less than 0.8 percentage points before Lehman collapsed. It reached a record high of 3.64 percentage points on Oct. 10, and sits at 1.24 today. So according to Greenspan, we’re a little more than halfway to recovery.
Good news?
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More real estate news. Mortgage rates tumble to record low …. MSNBC.com’s editorial cartoonists weigh in on the subprime mortgage meltdown. more photos …
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Mortgages…now what??
Mortgage rates tumble to record low
Refinancing activity rises to highest level since boom year of 2003
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Rates on 30-year fixed-rate mortgages fell to a record low for the second straight week, causing refinancing applications to surge to the highest level in more than five years, a month after the Federal Reserve pledged to channel billions to prop up the sinking U.S. housing market. While homeowners around the country are taking advantage of historically low rates to refinance their loans, the opportunity isn’t available to those with poor credit or little equity in their homes, and foreclosures are still likely to surge. |
Treasury mulls plan to lower mortgage rates to 4.5%
Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said.
Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac. Details on the plan remain sketchy, but an announcement could come as early as next week, the source said.
More on this story at CNNMoney.com
