Good News! Mortgage Rates Drop
Good news on the home lending front! Mortgage rates have dropped over the past year and are dropping even further now that the Fed has slashed key interest rates. In addition, the Fed indicated that they would buy securities that are backed by mortgages. Both actions should mean lower consumer interest rates—particularly for mortgages.
The net impact of these actions is to make homes more affordable. Lower mortgage rates mean that more people can afford to buy homes. In addition, lower interest rates should help stimulate business recovery and ultimately lead to higher employment—which is also a critical factor affecting housing affordability. Of course, a continued drop in Jacksonville housing prices is a further contributing affordability factor.
A key question is how much further can we expect mortgage rates to drop? The most widely tracked index is the 30-yr fixed (FHLMC) rate, which as of today was at 5.00%, down from 6.11% a year ago. Some selective mortgages are expected to drop even lower, making these the lowest rates for conforming mortgages in the past thirty-seven years!
What Others Are Saying
bill barton, on 01/11/2009, said:
Long-term home mortgage rates dropped again this week with the 30 year fixed-rate mortage hitting a fourth consecutive low. According to the Wall St Journal the rate hasn’t been lower since Freddie Mac’s survey began in 1971.
The continued drop is attributed to the Federal Reserve’s recent purchases of mortgage backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae. On Friday, Jan 9 the Wall St Journal indicated that the Fed bought $10.213 billion of these mortgage securities in the first three days of the program and that the central bank has pledged to buy $500 billion, or possible more, of these bonds in the first half of the year. If the Fed continues to buy $3 to $4 billion per day, they will be on target to complete this program as planned.
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