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by STEVENSON JACOBS
&Mdash; It's a good time to borrow money for a home, car or small business.
A year after a global freeze in the credit markets prompted massive government intervention to prevent the financial system from collapsing, interest rates remain at historic lows. But banks are demanding more collateral, bigger down payments and detailed financial histories from borrowers.
And that's for people with good credit. Everyone else need not apply.
The stingy lending is likely to last.
"Banks are going to be in a defensive posture for several years. Most borrowers can't meet their criteria," says Christopher Whalen, managing director at research firm Institutional Risk Analytics.
No segment of borrowers has been spared:
_ Nearly seven of 10 mortgage applications were approved and financed during the housing boom five years ago. At the end of 2008, the number was down to five.
_ Revolving credit, which is primarily made up of credit card debt, declined by $6.1 billion, or 8 percent on an annualized basis, in July. That's a sign consumers are having difficulty obtaining credit and are cutting back on spending.
To be sure, it is cheaper for businesses and consumers to take out a loan today than it was at the height of the crisis last fall.
The average 30-year mortgage rate stands at 5.04 percent, after falling to a record low of 4.78 percent in April. The overnight rate that banks charge each other to borrow money — a key indicator of the credit markets' overall health — has plummeted. The London Interbank Offered Rate, or LIBOR, stands at 0.29 percent today. It soared above 6 percent last September when fear threatened to choke off lending throughout the financial system.
But those improvements are somewhat misleading. Lending — especially for homes — is being greased by trillions of dollars the federal government has made available to banks.
The Federal Reserve has provided nearly $340 billion in low-cost loans for banks. It has purchased $625 billion worth of mortgage-backed securities to drive down interest rates on home loans. The Federal Deposit Insurance Corp. is guaranteeing about $300 billion in bank debt, which enables banks to borrow at lower rates.
...19.07.10
O n the day she turned 16, Susan Bye said, "I dragged my poor mother out to the driver's license testing place -- I was not waiting." ¶ But when her son Alex turned 16, there was no such sense of urgency. "I was just kind of lazy, I guess," Alex said, "and kind of busy." ¶ Now that Alex, a Minneapolis Southwest High student, is a year away from college, "I'm getting more and more busy, so maybe I should just wait until I turn 18" in January to get the license. ¶ The Minneapolis teenager is far from an anomaly. He and many of his peers are waiting longer to get behind the wheel. Last year, fewer 16- and 17-year-old Minnesotans got licenses than at any time since 1991, according to the Department of Public Safety. ¶ Inertia is hardly the only orange cone on the road to a license. Every aspect of driving is costly. The state's road test is more difficult than it used to be. Teens in the city can ride bikes or take public transportation to many destinations. And some adolescents are simply intimidated about operating such heavy machinery. ¶ "I'm actually scared of driving and cars," said Ariana Wentzel, 18, of St. Paul. "Plus my dad refuses to drive with me, and my mom is just a spaz when it comes to driving." ¶ Wentzel's parents insist that if their children want to drive, they have to pay for insurance, which can be expensive for teens. ¶ The minimum rate for a 16-year-old, said Christe Kress, manager of Minneapolis AAA's insurance agency, would be "about $100 a month, for an occasional operator of an average vehicle." Factors ranging from grades to gender to the parents' insurance score can ratchet up the premium rate.
Source: Minneapolis Star Tribune
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