Comments follow CNBC’s Jim Cramer’s view that 5% is enough
Comments made this week on CNBC have been questioned by an industry economist.
Jim Cramer, a former hedge fund manager, said on the channel’s ‘The Squawk Street’ that US mortgage rates of 5% should be a “line in the sand” before they hurt the economy.
He added that "The mortgage rate is very high in this country."
His comments have been disputed by Ralph DeFranco, Arch Capital Services Mortgage Group's global chief economist.
He told Mortgage Professional America that while housing is slowing quickly, especially in the west, due to higher mortgage rates. But he says that while rates are a concern for homebuyers and builders, they are only a minor drag on the overall economy.
“Five percent is not a high interest rate in the big scheme of things, and it only matters to someone looking for a home, not existing homeowners since more than 90% of outstanding mortgages have fixed rates,” he said. “The economy is likely to remain strong over the next 6-12 months because the government is spending more and had a tax cut, resulting in a large 'stimulus package' that will keep consumers buying even with five percent mortgage rates.”
Not as worried as in 2007
Cramer has been critical of the Fed and saying they it has not accounted for the slowing housing market. He is calling for policymakers to look at the data to determine whether to add to the three rate hikes so far in 2018, rather than simply wanting to normalize monetary policy.
“Cramer likes saying the Fed is raising rates too fast - his famous rant in 2007 was dead right - but I'm not as worried as he is this time around,” concludes DeFranco.
Watch the video of Cramer’s 2007 rant:
Watch the full rant: Cramer's 'They know nothing!' from CNBC.
