Mortgage applications dropped 2.8% last week, according to the Mortgage Bankers’ Association. Refinance applications increased 3.3% and the purchase index declined 8.3%. Apparently consumers are waiting for better news from the lending industry, and they’re probably disappointed with the latest interest rates. U.S. subprime problems are affecting banks worldwide, and it’s not just the hedge funds and BNP Paribas. In latest news, Switzerland’s second-largest bank, Credit Suisse Group, is cutting staff in its mortgage-backed securities unit. No units are being closed yet, but staff is reduced drastically. Subprime securities, until recently the bankers’ favorite toy, are not attractive anymore. The credit crunch and the ongoing financial turmoil have revealed mechanisms and interlinks in international finance that caught many by surprise. Economists are saying there’s more trouble ahead, but I guess many have already learned the important lessons. Perhaps the world is changing.
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