Mortgage Interest Rates Fall Substantially
Posted by Benjamin Dona on Wednesday, November 26th, 2008 at 9:15pm.
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. Almost immediately after the announcement, long term mortgage interest rates fell by as much as one-half percent. As of this morning, a 30-year conforming fixed rate loan was available at 5.50% and the 15-year conforming fixed rate mortgage was at 5.625%. The FHA 30-year mortgage also fell below 6% and was available at 5.75%. Further declines are possible as the MBS purchases actually start occurring.
While the changes in rates won't make the housing market correct itself overnight, it should have a substantial impact for first-time home buyers, homeowners needing to refinance out of adjustable rate mortgages and the many folks who are trying to do loan modifications rather than face foreclosure. With a little luck, they may even fall far enough to help spur the housing market so it can begin to draw down on all the excess inventory and start stabilizing home prices. Only time will tell.
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About the Author
Benjamin Dona is the Broker and Owner of Gulf Coast Associates, Realtors in Bonita Springs, Florida. He holds two advanced degrees, an MBA and an MA, and has an extensive background in both business and marketing. In 1998, he founded Gulf Coast Associates, and formed a group of like-minded Realtor® associates dedicated to offering professional Southwest Florida real estate services by concentrating on information, education and the use of leading edge technologies. He also is a recognized expert on the "Net," a much-quoted and read blog author, and a contributor to both national and international news outlets. Benjamin is a member of the National Association of Realtors, the Florida Association of Realtors, and numerous local real estate boards throughout Southwest Florida.
Contact Benjamin Dona at 239-948-3955
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