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Libor Critical



September 30, 2008 – Comments (10)

The Libor rate shot through the roof and I believe people's variable rate mortgages are tied to it. 

I did a search back and did not find a previous post, but I do remember doing a post saying that it would be a good idea to convert those variable rate mortgages into fixed mortgages. 

The markets simply haven't had risk priced into them and now the repricing of risk is happening. 

I haven't seen a word in the news, but some people's mortgage payments just tripled....

10 Comments – Post Your Own

#1) On September 30, 2008 at 3:26 PM, dwot (29.01) wrote:

I didn't do a blog on it, I wrote it a comment...

I predict it is a good time to refinance.  I predict refinancing and go long on refinancing now would be a very good idea. 

I've been expecting rates to go up.  I hadn't really thought it through how it would work, but I suppose I expected the fed to have to raise rates.  The fed has lowered rates but that has not enabled borrowers to have access to borrowing at lower rates.  The market is doing what I expected despite federal manipulation.



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#2) On September 30, 2008 at 3:40 PM, pjani06 (28.62) wrote:

yah market rates & spreads for corporate & consumer exposure has done alot of wild things since the falls of AIG / Lehman.

I'm not sure if in that short period of time a translation was made to hit peoples mortgages at signficantly higher rates, but it seems its definitely set up for significant payment hikes going forward. 

more importantly, America's future economic capacity must be preserved.  The bailout that was courageously voted down would have been the wrong answer & most certainly send us into depression.  However solutions will still be hacked out at congress today & the near future til something

Check this out, the solution to the mess, posted today by Karl Denninger from / market ticker;

Denninger's "How To Fix Our Banking System" sent to all in Congress today


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#3) On September 30, 2008 at 6:01 PM, ctojeira (41.91) wrote:

Some ARM rates are based off the 1-year T-Bill, which is currently sitting at ~1.9%.  Typically ARMs run at a 2.75% margin.  It's hard for people to lock in a 30 year fixed at over 6% when their current mortage is running at under 5%.

It should be interesting to see if the short end of Treasuries go up anytime soon.  I'm not convinced that refinancing at a higher rate right now is the right move.


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#4) On September 30, 2008 at 6:09 PM, ctojeira (41.91) wrote:

BTW, congrats to your rise to #2.  I've followed your blog over the years and appreciate the insight that you've provided into this credit crisis.  In a way, you've helped me to protect my family's life savings during this market correction.  I appreciate the information that you provide very much.  Keep up the great work!



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#5) On September 30, 2008 at 7:49 PM, dwot (29.01) wrote:


I am glad to hear that you were able to protect your savings.  I have a few friends that I explained my reasons for being out of the market and they followed.

I am kind of frustrated that I paid a higher rate for interest rate protection the whole time I had a mortgage, but I worked in banks when we had rates that briefly went to about 22% on a mortgage back around 1980.

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#6) On September 30, 2008 at 8:16 PM, awallejr (35.12) wrote:

Problem is people can't refinance those adjustables into fixed rates because of the stricter lending requirements and decline in market values.  And as someone in the real estate business I always urge clients to go fixed rate over adjustable.  Reason why fixed is better is you know your expense.  And if rates decline you can refinance again into the lower fixed.  Adjustables are unpredictable.  I do, however, think rates will eventually decline once we get this rescue plan passed and with a Fed rate reduction.

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#7) On October 01, 2008 at 1:34 PM, kdakota630 (28.98) wrote:

Congratulations on achieving the #1 spot!

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#8) On October 01, 2008 at 1:48 PM, SpecBear (30.86) wrote:

Welcome to the Top Fool Club!

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#9) On October 01, 2008 at 2:02 PM, abitare (29.95) wrote:

Congradulations Top Fool!

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#10) On October 02, 2008 at 7:29 PM, dwot (29.01) wrote:

Thanks all... 

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