FED ACTION: LIGHT AT THE END OF THE HOUSING TUNNEL?
The federal reserve open market committee announced yesterday that it will purchase over a trillion dollars in mortgage back securities ($ 750 billion ) guaranteed by Fannie Mae and Freddie Mac and ($300 billion) in longer term federal securities.
The feds intervention will drive up the price of these securities and lower their yield. The resulting lower interest rates should create a much more favorable environment for the real estate industry. The yield on the ten year note, an important bench mark in mortgage finance, dropped immediately 50 basis points from just over 3% to just over 2.5%. So it is quite conceivable that in the not too distant future we will see mortgage rates for qualified buyers in the 4% range. Hopefully purchasers that have been on the side linewill realize this opportunity.
So here's to BERNANKE THE BOLD!
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