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December 31st, 2008

Lower Mortgage Rates to Hold Into ‘09

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Instead of reflecting back on one of the most trying years in financial history, let’s look to the future. The Federal Reserve confirmed yesterday that they will begin purchasing $500 billion worth of mortgage-backed securities (MBS) from Fannie Mae, Freddie Mac, and Ginnie Mae beginning in January. Their confirmed dedication to the mortgage market has instilled confidence that mortgage rates should remain at their very low levels (either a little above or below) for some months ahead.

The Fed’s announcement last month, combined with a preliminary purchase of GSE debt, has already helped to push mortgage rates down to under the 5% range. As the Fed initiates their purchases of MBS in 2009, low mortgage rates are due to have some staying power.

Yet, with the Fed’s program in place, something is still missing: the involvement of the private mortgage market. The recent surge in refi activity has rejuvenated that market to some degree — allowing lenders to clear off some old debt from their books — but it hasn’t been enough to re-establish its previous involvement. Once private lenders feel confident enough to re-enter the marketplace, the significant shift we have been waiting for could be upon us.

Americans have certainly already begun to take advantage of the lower rates. According to the Mortgage Bankers Association, mortgage applications last week matched the highest levels since July 2003:

Requests for home purchase applications climbed 1.4 percent to 320.9 on a seasonally adjusted basis…

The refinancing index had surged by nearly 63 percent in the prior week, also to the highest level since July 2003.

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3 Responses to “Lower Mortgage Rates to Hold Into ‘09”

  1. The Fed Cut Interest Rates Says: January 1st, 2009 at 10:59 am

    [...] HSH Financial News Blog » Blog Archive » Lower Mortgage Rates to … [...]

  2. oswin grant Says: June 6th, 2009 at 6:16 pm

    I enjoyed the information you had to offer, I’m just glad that there are folks like you telling folks about ways to get some good help with their mortgage situation and I’m glad they are learning that there are ways to get out of this mess. I blog too and try to help out anyway I can on my site. Good stuff.

  3. Tim Manni Says: June 8th, 2009 at 12:11 pm

    Thanks Oswin.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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