Freddie Mac in their weekly survey said today that the U.S. 30-year fixed mortgage rate fell to 4.85%, the lowest rate since the company began keeping records in 1971. Rates averaged 4.98% the previous week.
Rates have declined since the Federal Reserve announced on March 18 that it will purchase up to an additional $750 billion of mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae. The Fed is trying to lower rates by reducing the supply of outstanding mortgage bonds, boosting their price and lowering yields. That would allow banks to reduce the rates on new mortgages and still sell mortgage securities at a profit.
The 15-year rate averaged 4.58%, down from 4.61% a week earlier, Freddie Mac said.
Mortgage applications in the U.S. rose for a third consecutive week and the National Association of Realtors said sales of existing single-family homes rose 5.1% last month, with distressed properties making up 45% of all sales.
China’s central bank said complacency and a conviction in the U.S. and developed economies that markets always correct themselves triggered the global financial crisis.
“Market forces, if unchecked, will lead to asset bubbles and ultimately a disastrous market clearing in the form of a financial crisis like the current one,” the People’s Bank of China’s research arm said in a report on the central bank’s Web site today.
“Although the U.S. regulatory structure was a complex patchwork of fragmented agencies and jurisdictions some believed that it worked quite well,” the central bank said. “The cost of waiting for the system to break has turned out to be tremendous.”
The profit-seeking nature of Western financial institutions and the view that “if it ain’t broke, don’t fix it” were the underlying causes of the crisis, the central Bank said.
Economist and NYU economics professor Nouriel Roubini said that while Treasury Secretary Geithner's plan to rid banks of toxic assets via the Public-Private Investment Plan (PPIP) is a step in the right direction, he also warned that things could get very ugly, very quickly' if the economy worsens because the government is bearing the first risk of loss.
He also said there was a real possibility that removing toxic assets from bank balance sheets could show that one or more financial institutions were effectively insolvent.
Roubini, who correctly predicted the housing bust and financial crisis back in 2006, believes the plan should only apply to firms found to be solvent by the government's stress-tests.
The stress test should do a triage between banks that are illiquid and undercapitalized but solvent given the provision of capital and liquidity and those that, under a reasonable stress scenario are effectively insolvent, he wrote on his blog. Those that are insolvent should be nationalized.
The Reserve bank of Australia (RBA) said today that Australian banks continue to report solid profits, haven’t accumulated large holdings of high-risk securities, and didn’t ease lending standards to the same extent as counterparts around the world.
“The Australian banking system is considerably better placed to weather the current challenges than many other systems around the world,” the Reserve Bank of Australia said in its half-yearly Financial Stability Review.
“Notwithstanding this positive assessment, the banking system is facing a more difficult environment than it has for some years,” the report said.
Problem loans have risen from “very low levels” and lending growth has also slowed recently, the Reserve Bank added.
The ratio of non-performing assets to total on-balance- sheets assets was about 1 percent in December, compared with 0.4 percent a year earlier, the central bank said. “This ratio is now marginally higher than that recorded in the 2001 downturn” and “well below” the 6 percent peak in the early 1990s, when the nation’s economy was last in a recession.
Housing loans that were 90 days or more in arrears accounted for 0.48 percent of outstanding loans in December, compared with 0.32 percent a year earlier.
“Looking ahead, the main downside risk to the performance of banks’ housing portfolios is from a rise in unemployment as the economy slows,” the report said.