Today Mortgage Interest Rate

BRIGID GLANVILLE: The world economic outlook for this year is going from bad to worse, with two more warnings that the United States is heading into recession.

Locally, more home owners will be feeling the pinch, after the Commonwealth Bank, ANZ and the National Australia Bank (NAB) all raised interest rates this week.

Today there were revelations the banks are directly exposed to the subprime crisis, after they all lent money to troubled US mortgage group, Countrywide Financial.

Tom Iggulden reports.

TOM IGGULDEN: The United Nations' annual economic forecast was released today predicting there's a 50 per cent chance that the world economy is heading for a recession.

It says the US subprime mortgage crisis "could trigger a worldwide recession and a disorderly adjustment of global imbalances."

Meanwhile on Wall Street the sentiment is more certain and more gloomy.

Falling Dollar Saving Mortgage Market, expert says

Treasury bill rates have fallen from 5 percent to an astonishingly low 3 percent, while 10-year Treasury rates (to which 30-year mortgages are indexed) have declined from 5.2 percent to 4 percent, with most of the decline happening in the last month.McDonald's thesis is that the recent plunge in interest rates has, almost overnight, changed everything. "The doomsday scenario painted by Wall Street over subprime mortgages and housing is suddenly way overblown."The Fed controls short-term interest rates; longer-term rates are at the mercy of foreign investors who are the primary buyers of U.S. Treasury bonds and bills. Japan and China combined own close to 60 percent of the US Treasury debt."The lower U.S. Dollar finally brought in foreign investors looking for bargains," says Mr. McDonald. "The worry that the Dollar could free-fall does not seem to worry foreign investors today.

POLISHED DIMON

His JPMorgan Chase is now worth more in market value than the one-time world leader Citigroup, which ill-advisedly pushed aside then-heir apparent Dimon a decade ago.

Despite JPMorgan's big writeoff on bad housing bets yesterday, its stock surged nearly 6 percent, propelling it to rally other Wall Street banks from their slump - and leaving battered Citigroup to fall behind to a new 52-week intraday low of $25.90 over its wrecked ledger.

Analysts said Dimon's steady hand on the wheel instilled confidence among shareholders that JPMorgan and several other banks have put most of their bad news about junk mortgage paper on the table.

"Though the numbers were slightly weak, you have to give Jamie Dimon credit for avoiding most of the problems that have plagued his competitors," said Thomas Russo, a partner at Gardner Russo & Gardner.