Friday, November 2, 2007

Shakey Money

So the big financial news yesterday was that the Fed Fund Rate dropped another quarter point to 4.5%. Supposedly this is to enable people to borrow money more easily "in hopes of boosting the ailing housing market and buoying the overall economy." Someone explain this to me please, because I am dumb. I thought one of the problems behind the "ailing housing market" was the flood of foreclosures from all those people who couldn't afford to buy houses, who got sub-prime mortgages that they couldn't pay? So the solution to that is to enable more people who are incapable of paying mortgages to qualify for them?

I don't know. I ain't no economist but does that make sense?

What I do know is that hardworking Joes like me who have been socking most of their nest eggs into high yield savings accounts are going to suffer, because banks everywhere are dropping their rates like rocks. I hate to lose the liquidity, but I am scouting around for a high yield cd, just so that I can lock in a decent rate for a while. I've got Everbank's intro rate of 6.01% until January, and then it's going to be slim pickin's. Thanks a lot, Ben Bernanke.

I keep debating whether to start thinking about buying a house this year. Yes, it is certainly a buyer's market, but this slump will continue for a few more years, at least. If I do buy, I need to be able to commit to living in it for a while and paying the mortgage for a few years. I keep asking myself, what if I get married in a year and move to Oshkosh? I will be forced to sell it at a loss or rent it out; both prospects make me nervous.

This is one of the reasons I miss being married. When finances get scary, at least you have a partner in the same boat as you.

1 comment:

Anonymous said...

I'm no economist, but I think the idea is:

Recent interest rate increases have caused homeowners with adjustable rate mortgages to see their monthly payment rise. Because the payment rose so much so fast, they could not afford the new monthly installment and had to default. Lowering the rate will lower the monthly required payment and prevent them from defaulting.