Stimulus plan may lead to higher mortgage rates | Reuters
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Saved by 1 people (0 private), first by anonymouse user on 2008-04-11
- Exoticrain on 2008-04-11 - Tags 2008 ESA , research , economics
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When falling rates prompt refinancing of loans in mortgage bonds, investors can be hurt since principal may be returned to them at a price below market value. The investor is also faced with reinvesting principal in bonds paying lower rates.
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"When you start throwing a lot of jumbos into a pool you spoil the fungibility of the collateral," said Linda Lowell, a mortgage market veteran and principal of Offstreet Research LLC. "That has made the market as liquid as it is. Home owners have benefited from lower mortgage rates."
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