It is actually more complicated since the US Federal Reserve directly influences the cost of bank funds that are resold to consumers directly through the Federal Reserve discount rate (currently 1%) . Also, the regulation (or lack thereof) of the sale of mortgage-backed securities on the secondary markets by such "blended" federal-private mortgage companies like Fannie Mae and Freddie Mac increases the availability of home mortgage loans to consumers (essentially flipping loans for origination fees with minimal risk in the process) and shifts the risk of rising home foreclosures and falling investment yields on home mortgage-backed securities to the Federal Government (when insurance fund reserves are depleted) and institutional investors and individual pensioners. The investment risk of peaking US housing market prices (buttressed by historically low debt service levels) is globalized through the sale of these mortgage-backed securities in international markets such
as London and Japan. Hence, low interest rates fuel higher home values which contribute to the consumer borrowing cycle via higher home equity loans which are deductible from Federal income taxes.
Robert D. Manning
joanna bujes <[EMAIL PROTECTED]> wrote:
The chief govt support in the US for mortgages (that I know of) is that
interest paid is tax deductible.
joanna
Chris Burford wrote:
>Gordon Brown and the British government have been looking enviably at
>the US mortgage market where long term fixed mortgages play a part in
>a mixed economy.
>
>Mortages in the UK are almost all short term. Arguably fluctuations in
>interest rates for national and international economic reasons, have a
>big impact on a key electoral constituency, and in turn cause short
>term swings in housing.
>
>In the preview of a studiously academic report to be published in
>London this morning, the BBC commentator noted that of course
>there is government support in the US for long term mortgages.
>
>What is this? and what is its murky economic and political history?
>
>Thanks
>
>Chris Burford
>London
>
>
>
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