News

12/05/2008 - Treasury Department Considers New Housing Plan with Lower Mortgage Rates

The US Treasury Department is considering a plan to provide mortgage loans at 4.5% as a way to revive the U.S. Housing Market.  The plan being considered would apply to new home purchases, not refinanced loans.   It also may be limited to exclude homes that are out of line with measures of affordability. 

This is after the Federal Reserve unveiled a plan last week (November 25th) to buy up to $500 Billion of mortgage securities and up to $100 Billion of Fannie Mae and Freddie Mac Debt.  This caused rates to drop by a half point virtually overnight.  Many borrowers missed a chance to refinance when the Fed jumped in and put Fannie and Freddie under conservatorship.  This recent rate drop has brought rates back down to the lowest levels in over 3 years. 

The Treasury plan may involve buying additional mortgage securities.  The more demand there is for mortgage securities means rates will go down.  If the Treasury drives up the price of mortgage bonds, the rates go down.  (See Bond Prices and Yields)

The question we are asked is "Will rates continue to go down?"  It's hard to say.  There are many economic factors to consider.  There certainly is quite of bit of bad news, which causes downward pressure on rates.  But rates are at almost historic lows - there is some debate how much lower they can go. 

The Fed is also cutting their short term rates - though this does not have a direct affect on mortgage rates. 

Our advice is to set a rate target that makes financial sense to you, and when it is available, pull the trigger and lock your Rate.  You can consider a No Point or No Closing Cost Refinance to reduce your risk.  The rate 'may' be slightly higher, but it also allows you to save money without cost.

Consider signing up for our Rate Watch - which can email our rates to you when you choose.  Or ask us to provide a custom rate quote for your situation.