Government may look to further action to bring mortgage rates down to historic lows
December 4, 2008 by admin
The government is looking to take further action to stabalize the housing market and curtail the rate of home foreclosures. The economic downturn that the country has experienced over the last 12 months can be directly tied into the fall out in the housing market. Home sales have continued to decline as consumers have lost confidence in the market and economy.
The Fed recently moved to purchase over 700 billion of mortgage backed loan securities, which led to a sharp decline with mortgage rates to 2008 low levels. This move has spurred a wave of new home refinancing, but the impact on spurring home sales is yet to be determined. The lower rates will help make house payments more affordable for consumers who are looking for a reason to purchase a new home.
The new proposals include a move by the government to create a new marketplace for mortgage backed loan securities that would have the possibilty to lower rates down to 4.5%. This move would certainly help to bring house payments lower, which certainly would help provide some incentives for the housing market. This would help to restore some incentives for home buying, but will need to be combined with further stimulus that could come in the form of rebates for purchasing homes. The issue of home foreclosures will need to be addressed further with lenders as the incentive for lower rates does not address home owners who are currently upside down on their home mortgages and do not qualify to refinance.