The Bank of America has notified someone I know that their floating rate mortgage will go from 4.50% in 2009 down to 3.125% starting February 2010. That’s a whopping drop of 1.375% and will result in big monthly savings.
I haven’t seen much about this in the financial press but I’m guessing that this magnitude of mortgage rate cut will have a significant impact the US economy, since there are so many floaters out there. That should mean money available to families, to either save or spend. Saving is good, since the federal government needs all the bucks it can borrow next year and it would be nice to cut its dependence on China. Spending is good too, especially on products and services made in America, to boost economic growth and employment.
OK you financial wizards of Wall Street, run the numbers and tell us the macro-economic impact of a cut of 1.375% on US floating rate mortgages next year.
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