Credit market beginning to thaw

Watching the Dow over the last week or two has probably given folks a little motion sickness and whiplash. Mortgage rates over the last week have been similarly volatile. After jumping up a percentage point last week, they have improved dramatically in the last few days. Using the same 30 year fixed loan with a 20% down payment that I have used in previous posts, the rate is now back down to 6.0% after climbing to 6.875% a week ago. Lower rates indicate more willingness to loan, and could give a much needed spark to the real estate and mortgage industry.

There are other signs that the credit market is beginning to thaw. The overnight LIBOR rate has fallen to 1.28%, below the Federal Funds rate of 1.5%, suggesting that credit markets are stabilizing. "Libor is a daily average of what 16 different banks charge other banks to lend money in London and is used to calculate adjustable rate mortgages...Overnight Libor soared to a high of 6.88% earlier this month after the government's $700 billion bailout bill was signed into law."

Other signs of the credit market beginning to thaw:

• Larger companies that were having difficulty getting overnight loans a month ago, are now finding a market for their 30 and 60 day loan paper.

• Shoreline School District sold capital-improvement bonds valued at $25 million for a total interest rate of 4.94 percent, said Trevor Carlson...As recently as last week the interest rate — and the potential cost to the district's taxpayers — would have been substantially higher, he said.

• King County's sale of $48 million in short-term "bond anticipation notes" for jail improvements attracted eight bidders — more than expected, said Ken Guy, the county's finance director.

CNN Money
Seattle Times