Orange County Mortgage Rates Could Rise Soon

by Vince Bindi on September 15, 2010

Mortgage rates in Orange County could rise for all borrowers as a result of additional costs that are likely to be incurred by banks when they comply with new rules for the global financial system.

Central bankers and regulators from 27 countries agreed in Basel, Switzerland that banks should raise the amounts they hold in common equity from 2 per cent to 4.5 per cent to help ensure that the financial system can survive any future shocks. They will also have to hold a capital conservation buffer of an additional 2.5 per cent, raising their total liquidity cushion to 7 per cent of their assets and liabilities.

In a joint release, regulators said the new “Basel III” rules would provide a “fundamental strengthening of global capital standards” after the meltdown that crippled the world economy in 2008-09.”

But what does all this mean for the ordinary OC mortgage holder?

The warning is being released that the cost of borrowing would rise as a result of Basel III. The liquidity requirements are significant under this new system, as these feed through to the price and the availability of lending.

“A bank is like any other business – if its fixed operating costs go up, then so does the price of its product.”

“All the changes are good from a stability perspective but add billions to the fixed operating cost of a bank. The consequence is that inevitable the cost of credit – the price the borrower pays from money – will rise.”