I hope everyone had a fantastic Thanksgiving!
Tuesday morning, November 25th, the Federal Reserve announced that they were going to purchase as much as $600 billion in debt and mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. Of that, $100 billion will be spent on the direct debt of the three companies and the remaining $500 billion is to be spent on the purchase of the companies' mortgage-back securities. In their written statement the Fed said that "this action is being taken to reduce the cost and increase the availability of credit for the purchase of homes, which in turn should support the housing markets and foster improved conditions in the financial markets."
Separately the Fed will lend up to $200 billion on newly and recently originated AAA securities backed by education, auto, credit card and Small Business Administration loans.
The central bank is doing everything it can to re-ignite the domestic growth. It will take several months before we know if these efforts are successful.
The mortgage market rallied early Tuesday morning and rates dropped significantly! We saw 5.25-5.50% early in the day for conventional and FHA loans. By the end of the day the market steadied a little and Wednesday was more of the same. Rates are still much lower than they were last week.
What no one knows right now is how long this will continue. In the past I have seen this last one day and there have been times where it will last a month or two. The market has been very volatile in the last few months, so there is no guarantee that these rates will stay here for very long. What it means to anyone looking to buy (or refinance) a home is that rates are fantastic, home prices are low and so it is a terrific time to buy a new home!!
