GOOD NEWS FOR HOME BORROWERS - Yesterday's Fed Action Brings Down Mortgage Rates!

Real Estate Agent with Dean's Team - Keller Williams Realty Partners Chicago IL

Good news on home mortgage rates, folks!  They've headed down, in the past 24-hours alone!

Sorry . . . no improvement yet on the massive inventories of distressed homes available for sale here in Chicago and in many communities across the U.S., and underwriting and credit standards are higher to get these now-cheaper loans. Thousands of jobs have been lost over the last few months, here in Illinois and elsewhere. 

But amid a sea of gloomy housing news over the past few days, this favorable interest rate news is certainly welcome!

As we know, one the key problems recently standing in the way of the U.S. Economy in general, and our Housing Market in particular, is the availability of financing dollars for consumers and businesses.

Yesterday, the Fed moved to break up the log jam of frozen funds for business and consumer loans, including mortgage financing.  They pledged to pump another $800 Billion, mainly from the Federal Reserve, into the nation's credit markets, to help restart bank lending once again.

The Fed's move includes plans to purchase up to $600 Billion in mortgage debt owned by Federal Banks, Fannie Mae, Ginnie Mae, and Freddie Mac - giant U.S. Loan Guarantors and Investors now directly controlled by the Federal Government.  They also plan to provide an additional $200 Billion to investors acquiring securities tied to car loans, credit card debt, small business loans, and auto loans.

This dramatic move inspired investor confidence right away.  Within the last day, rates on many 30-Year Home Mortgages, for purchase of a new home or refinancing your current loan, fell dramatically - up to 0.5%, in many cases. 

One of our loan officer partners at Bank of America here in Chicago, Tommy Gonzalez, reports current interest rates as low as 5.375% for a 30-Year Fixed Rate Loan with 10% down, assuming the borrower has very good credit.  He reports today's rates for FHA-Guaranteed Loans fell as well, to 5.50% for a 30-Year Fixed FHA Loan.  Refinance rates are currently as low as 5.625% for a 30-Year Fixed, Gonzalez continues.

Said U.S Treasury Secretary Henry Paulson, "Nothing is more important to getting through this housing correction than the availability of affordable mortgage finance."  He added that the market for securities backed by consumer debt "came to a halt" last month, making it extremely difficult for many to find affordable financing for everything from student loans to household items.

In recent weeks, investor yields on mortgage-backed securities have increased.  This has the effect of raising the costs to borrow.

Beginning next week, as the Fed begins to purchase securities tied to mortgage debt.  The effect will be to increase the price of this debt to investors, driving down yields, and theoretically bringing down mortgage interest rates.

Michael Feroli, an Economist with J.P. Morgan Chase, said yesterday, "We expect this action will measurably improve conditions in the mortgage markets and will have beneficial effects on housing and the broader economy."

Please read our post this afternoon @ BlogChicagoHomes.comfor more, as well as a link to in-depth coverage from Jon Hilsenrath and Deborah Solomon's article in today's online Wall Street Journal.



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Terrie Leighton
Ferrari-Lund Real Estate - Reno, NV
Reno Real Estate Agent ~ Selling Homes in Reno

This was great news for home buyers! I had a client that was able to lock in yesterday and was ecstatic at his lower rate. Defiantly made my day to have a happy client.

Nov 26, 2008 08:03 AM #1
Tiffany Landis
Tacoma, WA

Yay for rates.  Although yesterday, they went down, then went back up almost a point and now are heading back down again.  Emotions around the office were up and down yesterday for sure.  Happy Thanksgiving.

Nov 26, 2008 08:07 AM #2
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

New Home affordability is now the best it has been since early 70's and prices have come down to levels that are great for investment in the future. Rates are now at 5.5%. They will fluctuate between 5 - 6 % for next 90 days. Then expect them to go higher. Huge bargains in value. CNBC today predicts massive home buying beginning of next year when people realize that prices are down and what purchasing power there is. Tell your buyers that stimulus package yesterday provided government assurances of lending for home mortgages. Be on the for front of breaking information that will provide extra money for prospects.   Please call your hot prospects over the weekend and tell them to buy now. It will not get better and to stop waiting.   Remember   1% less in Mortgage rates = 10% more housing purchasing power

Nov 26, 2008 08:12 AM #3
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Dean, if having a lot of homes to choose from doesn't get your attention an interest rate that low should. Thanks for the up to the minute update.

Nov 26, 2008 10:11 AM #4
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Dean Moss

Dean's Team Chicago IL Real Estate Team
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