The 30-year fixed-rate mortgage, which is used as a benchmark for evaluations, has fallen by 12 basis points, reducing them to 5.8%. This information comes from a national survey taken of the largest lenders. Basis points are calculated as being one-hundredth of a percentage.

Another benchmark, the 15-year fixed-rate mortgage, has managed to fall a total of 16 basis points, reducing their rates to around 5.51 percent.

The number of applications for mortgages continues to fluctuate. Depending on how you count the figures, the number of applications has managed to either go up or down in the past month. Factors such as the Thanksgiving holiday have to be considered; the effect that day has had on the lives of people applying for mortgages is particularly pronounced. According to the Mortgage Bankers Association, the raw number of applications for mortgages rose by roughly 33%.

Bob Walters, Quicken Loan’s chief economist, has mentioned his thoughts on this subject. He believes that the recent drop in mortgage rates has proven to be a huge incentive for consumers looking to refinance and obtain a fixed-rate loan. He also feels that those who are looking to enter the market in order to purchase a home have an outstanding opportunity to acquire a cheap investment.

It does seem like borrowers are looking for more security than ever before. Only 1.1% of all applicants for a home mortgage were asking for adjustable-rates in recent history. Those that already have adjustable mortgages are trying to refinance into loans with fixed-rates as well, in order to obtain the certainty they desire when it comes to making monthly loan payments.

At the same time, defaults on car loans appear to be rising, increasing worries for investors. As a result, some investors are wondering whether another major market for fixed income investors, student loans, may be the next sector to fall.

But the troubles affecting the subprime market and the auto loan market may not necessarily translate into problems for the student loan sector. Still, there is the distinct possibility that student loans could become a risky investment in the near term. That’s because student loan default rates have been increasing in the past few months. But while the defaults are cause for concern, they don’t appear to be a trend as of yet.

If, however, there is a noticeable increase in the unemployment rate, student loan defaults could escalate.

One of the advantages to investing in student loans is the fact that they are insured by the U.S. Department of Education. Private student loans are not federally insured, but applicants for those loans need to demonstrate a solid credit history in order to qualify. In addition, such private loans often require a co-signer who is legally responsible if the student should default.

Yet, the subprime loan crisis could have a potential impact on private student loans. If the housing crisis leads to a recession, new college graduates may find it difficult to find a high-paying first job. As a result, they may find it difficult to keep up with their student loan payments. So far, however, the housing situation has not fanned the flames of recession.

The Fed has decreased the federal funds rate, the rate that banks charge each other for overnight loans.

The rate cut marks the third one for the Fed this year.  It follows a nationwide housing crisis—the worst housing slump in some 16 years.  It also comes in the wake of a subprime loan crisis which has caused some financial institutions to leave the subprime business altogether.  Subprime loans are those loans which are extended to individuals with shaky credit histories.  The default rate on subprime loans has been incredibly high, giving rise to the current crisis.

In addition, home prices have fallen dramatically, causing understandable concern for home sellers.  At the same time, would-be homebuyers are having a tougher time obtaining mortgages because of stricter loan standards.

Some analysts are predicting that the Fed will cut interest rates again in 2008—with as many as three rate cuts on the way.  The current rate cut should lead to lower interest rates for credit cards, homeowner loans, and adjustable-rate mortgages.

The Fed’s rate cut also has an indirect effect on long-term rates on such loan products as 30-year mortgages.

Meanwhile, interest rates for savings are also tumbling.  The yield on a 1-year certificate of deposit has dropped to 3.49%.  That’s compared to a rate of 3.8% during the same period 1 year ago.

Economists do not expect the housing market to recover until at least the middle of 2008.  As a result, the housing situation could become a major issue in next year’s Presidential contest.

So far, the housing crisis has not given rise to an all-out recession, although that fear obviously persists.  As a result, the chairman of the Federal Reserve Board has vowed to do everything possible to keep recession at bay.

The housing market has been in free fall for many months, the result of plunging home prices and sluggish sales.  It’s also become increasingly difficult for prospective homebuyers to purchase houses because of stricter loan standards.   Meanwhile, the foreclosure rate has doubled over the past year and additional foreclosures are expected because of the resetting of interest rates on adjustable rate mortgages.

Legislation introduced in Congress would permit bankruptcy judges to change repayment terms on homeowner loans in an effort to help financially-troubled homeowners hang onto their homes.  Through the program, judges could lower interest rates, extend the life of the loan, or forgive part of the debt removing the need for debt consolidation.  A judge could also lower the principal of the loan to the house’s fair market value.

An organization called the Center for Responsible Lending expects such changes to assist more than half a million families keep their homes.  The plan could also save lenders money by reducing their foreclosure costs.

However, the lending industry opposes the legislation, saying that the stricter regulations are unnecessary and that the market should be permitted to correct itself.   Still, with as many as 2 million additional foreclosures predicted for the next year, such arguments may hold little sway with lawmakers.

It’s also likely that the national housing crisis will become an issue in the 2008 Presidential race.  With so many homeowners facing foreclosure, housing problems may emerge as a key topic for political discussion.

The housing crisis is not expected to lessen until the middle of next year.  Economists appear to be divided about whether the housing crisis will lead to an all-out recession.  Meanwhile, the Federal Reserve Board has pledged to do its part by doing everything possible to keep the economy humming into next year.