In his testimony to congress, Federal Reserve Chairman Ben Bernanke said that the subprime mortgage sector has “deteriorated significantly”, causing “increased concerns” among investors in some other types of financial instruments. It seems that top figures in the industry are finally admitting that the problems in subprime lending are a serious issue, with Freddie Mac’s CEO Richard Syron saying he doesn’t believe that housing has “hit bottom”, and that “things are going to get worse”. What we’ve seen so far may only be the beginning of a huge collapse, not the “rebound” in housing that some had hoped for.
The Fed has trimmed its forecast for growth in 2007 and 2008, but inflation forecasts remain unchanged. Unemployment is expected to rise slightly.
Amid a flood of economy-related news this week, mortgage interest rates remained mostly unchanged from last week’s readings, probably because the general outlook changed little. The 30-year fixed-rate mortgage remained close to the highs for this year at 6.73%, and the 5-year adjustable-rate mortgage averaged 6.35%, the same as a week ago. 15-year fixed-rate mortgages edged down to 6.38% from last week’s 6.39%, and one-year adjustable loans were up slightly at 5.72% from 5.71% a week ago.
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