Interest Rates

Well it looks like the Feds have finally made a move that is actually going to have an immediate impact on the economy, especially the housing market.

The Federal Reserve announced yesterday that it would purchase Mortgage-Backed Securities (MBS) from Fannie Mae, Freddie Mac and Ginny Mae for up to $500 billion. The purchases will begin next week when the Fed will buy $100 Billion worth of the securities from primary dealers through a series of competitive auctions. Shortly thereafter, they plan to have selected asset managers begin conducting additional MBS purchases up to the $500 Billion total over the next few quarters.

These moves are substantial and should help begin freeing up the current mortgage gridlock and stubbornly high interest rates.…

Since the government announced it would be taking custody of Fannie Mae and Freddie Mac, there has been a substantial drop in mortgage interest rates which has raised the hopes that more buyers will pull the home buying trigger and help hasten the housing market recovery.

We could not agree more with that possibility. The rate on a Conventional 30 year fixed rate loan fell to 5.75% with zero points on Tuesday, and most other mortgage loan programs followed suit. Of significant note in this change is the fact that the announcement also had a major impact on jumbo loan rates. For months, they have remained stubbornly high, as the secondary markets turned their back on the programs. That, too, appears to be changing with this announcement. For example, a…

Rates on 30-year mortgages have jumped to their highest level in nearly eight months, reflecting the markets increased concerns about what the Federal Reserve might have to do to battle rising inflation. The MBAA reported that 30-year fixed-rate mortgages averaged 6.24% last week. That was up sharply from 6.17% the week before. It was the highest level for 30-year mortgages since they averaged 6.33% for the week ending October 26, 2007.

Analysts attributed the big jump to increased concerns in financial markets that the Federal Reserve might be preparing to start raising interest rates again in order to control inflation and bolster the weak dollar. In a speech on Monday, Federal Reserve Chairman Ben Bernanke signaled deepening worries about inflation…

In a prepared talk Tuesday morning, Federal Reserve Chairman Bernanke signaled further interest rate cuts by the Federal Reserve are unlikely because of growing concerns about inflation and the weak dollar. Specifically, he said that the Federal Reserves powerful doses of rate reductions that started last September along with the $168 billion stimulus package, including rebates and tax breaks, "should help bring about somewhat better economic conditions in the second half of this year."

To help brace the economy, the Federal Reserve has dropped its key overnight lending rate to 2%, a nearly four-year low, but Bernanke hinted again today that last month's cut was probably the last. "For now, the policy seems well positioned to promote moderate growth and…

By an 8-2 vote, the Federal Reserve Board's Open Market Committee cut both the Fed Funds and Discounts rates by 25 basis points this afternoon. The move lowers the Fed Funds rate to 2.00 and the Discount rate to 2.25. In lock step after the announcement, most the major banks immediately lowered the Prime rate to 5.00. In their post meeting remarks, the FOMC said that economic activity in the U.S. remains weak and the move in rates should help promote moderate growth over time. In addition, they made a point to stress that the Fed will monitor inflation and price stability closely (as some indicators of inflation continue to rise) and will adjust their stance on interest rates accordingly.

It appears the Fed is hoping that at these lower rate levels a…