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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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10 Responses to "Mortgage Interest Rates Fall Substantially"

dave in NYC wrote:
Although I'm pretty sure this rate drop will not jumpstart the real estate market, it may help stabilize it and help keep the bottom from falling out. Definitely think this is a good thing. It's a great time to be buying.

Posted on Thursday, December 4th, 2008 at 3:51pm.

Scott wrote:
Hopefully the fed approves the new 4.5% loan. That would stimulate a lot of activity. It's not that a lot of people don't have the money...They do...they just need a good reason to spend it and a 4.5% mortgage will help.

Posted on Wednesday, December 10th, 2008 at 4:27pm.

Benjamin wrote:
Let's hope you both at right. Nothing is going to help this economy without getting the housing market on a more solid footing.

Posted on Wednesday, December 10th, 2008 at 6:28pm.

JCL wrote:
I've heard that this fed action will target new purchases only and not refis, but I can't see how refi rates won't drop indirectly as a result. I'm waiting to pull the trigger on a refi in anticipation, at worst for the next couple of months if rates somehow fail to drop they will probably remain flat.

Posted on Monday, December 15th, 2008 at 1:54pm.

Todd Covington wrote:
So far it doesn't seemed to have helped a bit. The agents at my office to seem to be busier but think that's just a result of first of the year enthusiasm. Everything is overpriced, not just houses.

Posted on Monday, January 12th, 2009 at 4:19pm.

Derek Weeks wrote:
The drop in rates has definately helped the Denver market to get more listings under contract. However with that said it is still very difficult to actually get the transaction closed. Denver is still facing a 40% fallout rate from properties going from under contract status back to active status in the MLS.

The tarp money may have given some minor help in the easing up of qualification guidelines but still extremely hard to get the loan closed.

Posted on Friday, January 23rd, 2009 at 12:21am.

CD wrote:
I think they should get rid of mark to market also. This way they do not have to value the mortage everyday. No one can say how much they are worth so it drives prices on the MBS down and the banks have less money to lend.

Posted on Wednesday, January 28th, 2009 at 4:55pm.

Colleen Lane wrote:
Everything takes time but lets hope this propels our economy back to where it needs to be.

Posted on Monday, March 2nd, 2009 at 11:45pm.

Jill wrote:
Its nice to see mortgage rates so low. We have been seeing alot more activity since interest rates came down. Hopefully it will last for a few more months.

Posted on Monday, May 18th, 2009 at 9:13pm.

Mike in Indianapolis wrote:
Its funny to look back and see how volatile rates have been over the last six months. I am not complaining, but I think we are getting a little spoiled with rates in the 4's and 5's.

Posted on Tuesday, June 23rd, 2009 at 7:50am.

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