Home : Blogs : Alan Gross : Alan's Mortgage Information

Huge News For Mortgage Interest Rates

Huge News For Mortgage Interest Rates

The real estate market and mortgage interest rates received a huge boost this morning. The Federal Reserve (Fed) announced this morning that it would be purchasing Mortgage-Backed Securities (MBS) backed by Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and Ginnie Mae. This new program will be known as the Term Asset-Backed Securities Loan Facility (TALF). The total funds allocated to purchase MBS's is $600 billion. Some have suggested that this is a brilliant move by the Fed to help increase the availability of credit while lowering fixed mortgage rates. The Fed has been trying since late last winter to lower mortgage rates to get the housing market moving forward.

The effect on mortgage interest rates was immediate. Mortgage backed securities are trading over 100 basis points higher based on the news. If this trend continues we may see interest rates move down to the low levels we saw during late January and early February earlier this year.

In addition to the $600 billion for MBS, the Fed announced it is setting up a program to $200 billion program to support consumer and small business loans. This plan will support and create liquidity for auto, student and small business loans.

Mortgage-Backed Securities have been under pressure since September when investors who normally purchase them have shied away due to the uncertain futures of mortgage finance giants Fannie Mae and Freddie Mac. The effort by the Fed complements the Treasury's effort to prop up the mortgage market. The Treasury took over Fannie Mae and Freddie Mac in September and has been buying MBS's since the takeover.

As I have said in the past, some of these interest rate movements are short-term in nature. Although the actions are designed to push rates down over a period of time, no one knows how the market will react. To keep up with the trends in interest rates you can visit my Daily Market Report at www.mtg-info.net/DailyMarketReport.

I am always available to answer any questions you have concerning interest rates or mortgage loans.

Posted by Alan Gross on 11/25/2008 10:18 AM

Comments (5)

Post is included in group: By Referral ONLY active Rain Makers!!
Post is included in group: Long & Foster Northern Virginia
Post is included in group: Maryland Real Estate and Mortgage Group
Post is included in group: Montgomery County Maryland Real Estate Professionals
Post is included in group: Northern Virginia Real Estate

5 Comments on Huge News For Mortgage Interest Rates

NOV

Hay, I'm stoked! It's about time the Govmint did something for home buyers and home owners instead of corporate bigwigs with their private jets. Rates in the mid to low 5s should be a huge incentive to get people moving off the fence.

Happy Thanksgiving!

It won't make any difference except to first time home buyers and low priced foreclosures and short sales.

Lower rates won't help a home owner who is upside down with a home mortgage about 20% more than market value of their home.

A buyer can get a lower interest rate and try to buy but if the house doesn't appraise. . . . . .

Then what????

Lenn - you hit the nail on the head.... it is going to take much more than todays reaction to fix this economy there needs to be a plan for everyone upside down and have no hope

NOV

All journeys start with a single step. Part of the ongoing housing crisis is now being caused by a lack of confidence in the real estate market by consumers. This is the most positive news in along time to start reversing the down trend. This story made national news in all medias - TV, print and radio. The over supply of housing needs to be worked off and lower interest rates will go along way towards starting the process. First time homebuyer's have been reluctant to move into the market. This will help them move forward with the decision. I had several calls already from clients who inquired about ref incing to lower interest rates. Lower payments for them will lead to more disposable income to spend on other things.

I agree with you, Alan. People who are already so far gone are not going to get help with this latest move. People who can afford to buy the "troubled assets" (i.e., short sales and bank owned property) will be able to get a better deal, now, and move to take some of these homes out of the inventory helping all concerned.

It's a very nice thing to be able to help people in trouble. It's also a very nice thing to be able to help people who pay their bills, and have a decent credit score and good jobs realize a piece of the American Dream - home ownership.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?