Gosh, it is fast becoming "I told you so" week around here. This latest from Bloomberg:
U.S. Mortgage Rates May Wreak Havoc After Libor Gain
Sept. 16 (Bloomberg) -- The biggest jump in the London interbank lending rate in at least seven years could wreak further havoc on the U.S. housing market and there's nothing the Federal Reserve can do about it.
About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to the London Interbank Offered Rate, or Libor, according to First American CoreLogic in Santa Ana, California. Today's daily rate more than doubled, with smaller gains in the one-week and one-month rates, as lenders demanded higher compensation for risk after Lehman Brothers Holdings Inc. collapsed and the value of American International Group Inc. fell 84 percent in a week.
Daily Libor rates are used to calculate monthly adjusting mortgage resets, including some so-called ``option ARMs'' that allow borrowers to defer payments by increasing mortgage balances...
2% Fed Funds Rate ain't gonna save these poor homemoaners. I'm fixed at under 5% and my HELOC is tied to the FFR at Prime.
Those interested can get the key rates snapshot here.
Those 41 percenters are overwhelmingly in California and most are entering into their reset periods. Time to drag out another acronym; FRD, first reset default.