It’s a phrase we hear all the time, Sub-Prime, usually associated with the worldwide credit crunch now current across the mortgage market. But where did it come from?

Some historians think it can be traced back to the Old West and the vast cattle markets of of Chicago and Nebraska. Traders labeled the finest cuts of meat as “prime” and the lesser cuts “choice” — something of a euphemism, obviously.

However, “choice” was usually translated in buyers’ minds as “sub-prime”, that is, something no-one really wanted.

Then “prime” was adopted by American bankers to describe rates charged to their most creditworthy customers. All others became “sub-prime”.

British banks apparently have more fruity terms. What in the States is called “sub-prime” is in England labeled a “lemon”.

There are a lot of lemons around just now.

The Mortgage Bankers Association is reporting that more homeowners are falling delinquent on their mortgage payments. According to their report, 4.7% of loan payments were more than 30 day past due and 11% of mortgages were in foreclosure.

The trend is being blamed on high-risk loans with subprime rates and adjustable rate mortgages that are being affected by rising interest rates over the past few years.

More Americans Making Late Mortgage Payments

In a statement released today that can be accessed at the Federal Reserve Board Website it was announced that the Feds are going to keep interest rates at 5.25%.

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace.

The FOMC monetary policy faced only one dissenting vote. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting.

New home sales are way down and the number of existing homes on the marketplace is increasing. There’s more than one or two “For Sale” signs in most neighborhoods.

It’s a buyer’s market. Sure, the mortgage rates have gone up a point or so from their lower rates of last year but this fact has caused sellers to realize that with less attractive mortgage rates, the price on the house has to be attractive. House prices are falling with every month they go unsold.

And let’s face it, you can always refinance another day, when the rates are lower - but there’s nothing you can do about paying too much for your house.

There are a lot of voices telling you to wait, prices will come down more. While this may be true for a while, it won’t be true forever. Still, take your time in deciding on a purchase. There are lots of homes to choose from. Pick your lender carefully and make the best deal you can.

In a slower market with prices coming down and rates going up, you probably won’t be able to purchase your home and then turn around and sell next year at a profit, but wait 5 years and you will probably do fine.