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Banks Tighten Credit Squeeze

Lenders 'raising rates like crazy'

By Peter Fearon,  Newser Staff

Posted Aug 3, 2007 4:38 AM CDT
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(Newser) – Lenders are cutting credit, tightening standards or raising interest rates to a broader range of borrowers beyond those with weak credit records who qualify for subprime loans, the Wall Street Journal reports. Panic is spreading to a category of mortgages between subprime and prime that often involves borrowers who don't fully document income, or those buying for investment—about 13% of the market.

Lenders are "raising rates like crazy," said one mortgage broker, citing Wells Fargo's 8% charges for a type of prime 30-year fixed-rate loan that was under 7% last week. The squeeze "will further crimp effective demand for housing, and make late summer home sales season even worse than the dismal spring season," said an economist .

A home is seen for sale, Thursday, June 14, 2007, in Alameda, Calif. Rates on 30-year mortgages rose for a fifth straight week, hitting the highest level in 11 months as prospects dimmed further for possible rate cuts from the Federal Reserve. (AP Photo/Ben Margot)
A home is seen for sale, Thursday, June 14, 2007, in Alameda, Calif. Rates on 30-year mortgages rose for a fifth straight week, hitting the highest level in 11 months as prospects dimmed further for possible...   (Associated Press)
Traders monitor early numbers from the floor of the New York Stock Exchange, Wednesday, Aug. 1, 2007, in New York. Wall Street stumbled in search of a direction Wednesday as investors grappled with continued worries about U.S. home loans and the credit market and fresh data on housing and...
Traders monitor early numbers from the floor of the New York Stock Exchange, Wednesday, Aug. 1, 2007, in New York. Wall Street stumbled in search of a direction Wednesday as investors grappled with continued...   (Associated Press)
Sale signs are displayed in front of recently-constructed homes in a Little Rock, Ark., neighborhood Thursday, July 26, 2007. Sales of new homes fell in June by the largest amount in five months as the housing industry continued to struggle with its worst downturn in 16 years. The median home...
Sale signs are displayed in front of recently-constructed homes in a Little Rock, Ark., neighborhood Thursday, July 26, 2007. Sales of new homes fell in June by the largest amount in five months as the...   (Associated Press)
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