September 25, 2009

Are Home Buyers Getting a Reprieve?

Yes! Home loan rates would have shot higher at year's end if the Federal Reserve continued with plans to stop semi-monthly buying of Mortgage Backed Securities (MBS) in December. Not good for a struggling housing market.

After the September FOMC meeting, the Fed announced they would gradually wind down their purchase of MBS and stretch it out through March of 2010. This reprieve is good news for both home buyers and homeowners considering a refinance. The bottom line ... once the Fed reaches their target spending of $1.25 trillion, the buying will stop and home loan rates will go up. They're just hoping the housing market will be in better shape next year when it happens.

You only need to look back to last year before the Fed stepped in to be a major buyer of our mortgage bonds to see the positive impact this policy has had on home loan rates. I pulled out a rate sheet from September 25th of 2008 and found a 30 year fixed rate conventional mortgage cost 6.25% with NO Points. Today it's 5.00%. When the Fed began their purchase of mortgage bonds in January of 2009 home loan rates dropped below 5 percent initially. Since then they have been running between 5.0 and 5.5%. What a difference!

If you're planning to buy a home or refinance an existing loan, take advantage of these historic low rates while they are available.

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