Why Home Interest Rates Are Still High
Today’s column looks at recent children’s promotions and developments on the home-buying front:
Not your father’s interest rates: The latest discount rate cut by the Federal Reserve Board has pushed interest rates down to levels not seen since John F. Kennedy was President. Savings rates, that is. A look at mortgage rates from that era leaves us nostalgic.
Back in 1963, the average rate on fixed mortgages was 5.9%, according to the Federal Housing Finance Board. Today, the average is about 8%, according to HSH Associates of Butler, N.J. This gap exists even though some passbook rates have dipped to 2.75%, below the 4% rate paid on deposits in the 1960s.
Why haven’t consumer lending rates fallen to the levels of yesteryear? Bob Heady of the West Palm Beach, Fla.-based Bank Rate Monitor newsletter offers this explanation: “You have an ailing banking industry and a savings and loan industry trying to shore up their profits. They will charge what they can get away with.”
Holy Batburger: For the last three weeks, children dining on McDonald’s kids meals have been assembling a fleet of toy cars inspired by the movie “Batman Returns.” There is evil Penguin’s roadster and Cat-woman’s sedan. And there is a specially equipped Batmobile that scoots along on its own power when you depress Batman’s head.
Enough to make every kid over 3 want to see the movie, right? Sure, except this movie isn’t for them. It is rated PG-13, not suitable for all those car-collecting kids.
We tried to find out why McDonald’s did this, but the company couldn’t offer an explanation. Hang on to that excitement, kids. Perhaps when you’re older, your parents will rent the video.
Avoid the guilt: How do you goad parents into donating money to public television? Offer a toy during fund-raising breaks that follow broadcasts of “Sesame Street,” the popular children’s program airing on KCET, the commercial-free public television station in Los Angeles.
During its recent fund-raiser, KCET offered a 19-inch stuffed Elmo toy as a bonus for donating $60 to the station. Cradling the furry “Sesame Street” character, a pitchman cautioned children not to use the telephone number that flashed on the screen. Get your parents to call for an Elmo, he said.
KCET said the tactic was successful, helping to raise $3 million for the station in June. The station insists that the pitch wasn’t aimed at children. Spokeswoman Linda Lambert said 300 parents bought Elmo (at three times the retail price) “because parents like him.”
Layoff insurance: Should fears about layoffs stop consumers from buying homes? Apparently not, say firms that have begun selling “layoff insurance.” At Prudential California Realty Co., the insurance, which costs $20, covers mortgage payments for up to one year if the home buyer is laid off during the first year of home ownership.
Rick Merrill, chief operating officer of Prudential California Realty, said he got the idea from Volkswagen, which offered layoff insurance to car buyers for two months earlier this year. Volkswagen said the insurance helped fuel a 17% increase in auto sales for February and March. Of the 15,000 people who bought cars during that time, 90 have since lost jobs and filed insurance claims.
Merrill hopes that the gimmick, to be offered for the next four months, will boost sales for his firm too.
