Suppose that the rate cuts work, and the financial markets calm down. Then money will flow out of the very safe ten-year Treasuries, so long rates will rise. Added to that upward pressure will be the falling dollar, which may make foreign investors a bit skittish.
Logical conclusion? Fixed mortgage rates could rise, which may actually put a damper on the core of the housing market.
The fact is, if you are a borrower with good credit taking out a conforming mortgage, the current crisis has helped you. You can get a 15-year fixed rate at 5.98%, compared to 6.06% a yaer ago.
Is it possible Bernanke’s cut will help subprime borrowers and people on the edge, but push the pain into the core?