Keep an Eye on the Mortgage Market for Debt Consolidation OpportunitiesBy Richard Barrington
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Overlooked by the cloudy headlines about the mortgage market is the fact that there is a silver lining which has already started to emerge. Falling interest rates should ease some of the pressure on mortgage companies, and potentially open up home equity debt consolidation opportunities once more.
Rates Fall When Economy WeakensOne of the ways that economic forces can work as a self-correcting mechanism is that when the economy falters, interest rates often start to fall.
The Federal Reserve made headlines in August when it lowered the rate at which it lends money to banks, but as is often the case, the Fed was following the lead of the bond market, which had already driven interest rates lower out of concern over the economy.
In turn, lower interest rates help to stimulate a lagging economy. For example, lower rates help mortgage companies by increasing the spread between the rate at which they borrow money and the rate at which they lend it out. These increased spreads should help restore the health of mortgage companies, and ultimately ease pressure on mortgage rates.
Mortgage Companies are in the Business of Making LoansMake no mistake about it--mortgage companies are in the business of making loans. While they might temporarily tighten policies--e.g., raise credit standards, or lend out a smaller percentage of home equity--the road back to health for these companies is to make new loans, rather than just stand by passively while some existing loans go bad.
So if you were once considering using your home equity to consolidate some debts, take heart. Like many markets, the mortgage market is cyclical, and it is already possible to anticipate many mortgage companies getting up to speed again, quite possibly with lower interest rates to offer.
About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.
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