Analyst Lou Barnes sees one of two things happening: long-term interest rates will drop to the low 5’s … or, they won’t.

He predicts a drop to around 5.25% for fixed-rate mortgage loans.

Unless, and it’s a big unless, one of two things happen.

Oh, to be a fly on the oval wall – By Lou Barnes, Inman News, by way of Mortgage101.com

1) A rescue. There is only one that would work: the asset-firewalling bailout of the financial system recommended here for months, but the public is still far too angry at bad actors for that — which leaves bad ideas for rescue.

or,

2) BIG cuts in the 4.25 percent overnight cost of money

The trouble with #2 is that lowering short-term interest rates will only increase the chances of inflation heading out of control. Which could be a lot worse for our economy.

As Mr Barnes says, if the Fed chooses Door #2, it will make things a lot worse for a lot of people, before it gets any better.

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