Fed throws the housing market (another) life ring.

November 25, 2008

In a stunning announcement today, the Federal Reserve announced two key actions that are intended to stabilize the mortgage industry, and help unblock the frozen credit market.   They announced that they will purchase nearly  $100 billion of debt issued by government-sponsored mortgage enterprises Fannie Mae, Freddie Mac and the Federal Home Loan Banks.   The second step of this plan also calls for the Fed to buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

Here are a couple of good articles on what was announced today:

Fed Throws Financial Lifeline 

Mortgages:  Lower Interest Rates?

What does this mean for you and I?

Normally I don't report on all of the tweaking that the Fed does with interest rates, mostly because it doesn't have an immediate impact on you or I.  Often times when the Fed announces a rate reduction, the rates have already adjusted in anticipation of the announcement so there's no change once the word is official.

This may be different though.   In reading some of the “expert commentary” on the financial websites, some expect rates to drop and STAY at significantly lower levels for awhile.   If this turns out to be true, it will provide welcome relief especially the Jumbo loan level, where higher rates have kept many buyers in San Carlos on the sidelines.   And getting buyers to buy again is a shot in the arm that this market desperately needs.

It will be interesting to see what impact this has on rates — If you're in the market to buy,I'd highly recommend that you call your loan broker today to see where rates are heading.   This may be a great time to lock in.

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