"The spread between 'conforming' loans i.e. those below $417K and those above use to be .25% rate but due to the perceived increase in risk for 'jumbo' loans it's jumped to .75%.....this means ppl buying more expensive homes are getting slugged a higher rate."
True. This particular undesirable flow-on effect is one of the reasons the govt is looking at resetting the FMAC lending guidlines (as well as to provide "softer" refinancing options to the subprime resetters.)
But a drop in house values, while a negative for consumer spending, does not equate with armgeddon. I was in Silicon Valey at the end of the tech boom, which saw house values drop 20% or more very rapidly. I'm still here to tell the tale. :-)
We might see a US recesssion yet. We may not. Even if the US slides into recession, I don't believe Oz will automatically follow. Fundamentals are quite different.
-Mark
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