Looks like there really is a sucker born every minute.
Back in February 2004 High Priest Alan Greenspan spoke to US credit union leaders and dished out some, shall we say, "interesting" advice.
Of all the peculiar things Alan Greenspan said last week, none was more mystifying than his suggestion that consumers should seriously consider taking out an adjustable-rate instead of a fixed-rate mortgage at a time when interest rates are near record lows.With interest rates at rock bottom with nowhere to go but up, you'd have to be a fool to take the adjustable rate path at this point. Benjamin Wallace-Wells notes with great insight that this is most likely Greenspan's desperate attempt to squeeze one more round of home refinancing out of the US housing market and thus inflate the housing asset bubble just a little more to buy time for the real recovery.
The Fed chairman's comments on Social Security last week got the most attention, but on that subject he was simply stating the inevitable: Baby Boomers will have to wait longer and collect fewer benefits than their parents.
His comments on mortgages, however, left many financial advisers dumbstruck.
"It was possibly the strangest bit of advice ever to be proffered by an American central banker," says Jim Grant, publisher of Grant's Interest Rate Observer.
(San Francisco Chronicle, 2 March 2004)
Well, it looks like the High Priest's ex cathedra pronouncement is having its desired effects.
As mortgage rates climbed for the fifth straight week, an index measuring refinancing applications slumped to its lowest level since January and fell well off the peaks of a year ago, when mortgage rates flirted with historic lows.
Applications for mortgages on new home purchases rose slightly, however. And consumers applying for either a new mortgage or a refinancing of an existing loan are more likely than a year ago to opt for an adjustable-rate mortgage than one with a 30-year fixed rate as they look to keep near-term monthly payments as low as possible, mortgage brokers said.