By Chuck Doud
The Madera Tribune

Now that the Federal Reserve has lowered interest rates to nearly zero, you can expect demand for housing and other items usually purchased on credit to start increasing.

Although the Fed doesn’t lend money directly to consumers, it does lend it to banks, which then lend it to consumers, and if the banks have to pay less for the money they borrow, they can lower the interest rates they charge their customers.

However, those low rates won’t mean it will be easier for people with questionable credit to obtain low-interest loans. If anything, they may have to pay more interest.

Before the mortgage meltdown, it was a joke among some lenders that they would make a loan to anybody who could fog a mirror. That is not likely to be the case again for a long time — if ever. It may be that people who defaulted on mortgages and walked away from their obligation to pay as well as their homes may never be trusted with a home loan again.

That would be a shame, because people’s circumstances do change, and some of those who found themselves unable to meet their obligations will be able and willing to meet them in the future.

A lot of those questionable loans were enabled by the practice of bundling them by local lenders who then sold them to investors, who were mad when it turned out the loans they purchased were no good. Those investors will be less willing in the future to invest in mortgages that are even a little questionable.

So the news is good if your credit is good. Mortgages are at their lowest rates in nearly 50 years. It’s time to buy.

And in a while, the same will be true of car loans and most consumer financing.

This entry was posted on Saturday, December 27th, 2008 at 12:10 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.