I thought I would throw something out there for people to chew on. I just priced out a vanilla loan structure (LOW LTV: PERFECT CREDIT; CONFORMING LOAN) and got a par rate hovering around 5.5-5.625% yet the market is easily supporting a par rate closer to 5.25%. I think it is a perfectly legitimate question to ask why some (not all) lenders are not passing on the lower rates to consumers when it the consumer that has and continues to keep the financial industy afloat.

1. The consumer (tax dollars) continues to support the Treasury and MBS Market

2. The money being made by banks right now centers around fixed income trading (which again is supported by tax payers)

Yet, some banks have "rewarded" consumers with higher rates, higher closing costs, and higher fees in other areas of banking. You would think banks would be a little more appreciative of the consumer who saved them from complete and total collapse.........

Answer is same for Gasoline prices.

Fast to go up, but extremely slow to come down.

Lenders do tend to keep the rates higher when they could be lowered and sometimes you can see on the wholesale side that as soon as one lender drops their rates, others follow.

Also there are lenders that keep their rate higher as control for loan production flow. They reach a point where they can not process any more loans so they keep rates higher. Countrywide was notorius for this.

the antithesis is credit cards...

I think portfolio managers overlook this from time to time too...

With credit cards, the most profitable borrower is your poor credit / high interest rate borrower that has no hope in h*ll to pay of a 29.99% interest rate....

In mortgage lending, b/c of HOEPA and other regulations, a lender can only charge so much, yet is subject to so much loss - maybe even more so than credit cards despite the collateral assigned for mortgages, depending on down payment and property condition...multiply that by 1,000's and you got a mess you only hope to get your arms around...