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The Federal Reserve took extraordinary action today to drive down mortgage rates. The Federal government is planning to buy at least half the home loans made in the U.S. this year. It's a bold move analysts say could bring rates down by half a percentage point or more as soon as Thursday.
After the Feds made its announcement, mortgage rates started to fall and homeowners started taking action.
After some time in the deep freeze, the federal government is trying to warm up the nation's struggling housing market. The Federal Reserve plans to buy $300 billion in long term treasury bonds and spend up to $750 billion to buy mortgage backed securities.
"It is good news," says Joe Adamson, from Mortgage Magic.
Mortgage brokers are optimistic. The Feds' move is expected drive down mortgage rates, to a historic low, of well below five percent. Right now, the average 30 year fixed rate is 5.15-percent.
"It's creating more interest and with interest comes purchases, with interest comes request to refinance that make sense, and this could be the last hurrah in some people's minds of rates getting low and staying there," says Adamson.
That's why homeowner Bailey Szeto made his move to re-finance. His rate was 5.37-percent. After the Federal Government's announcement, his rate dropped by one point, so on Wednesday he locked it in.
"I think the savings I'll get each month will definitely speak to that, so that yeah, I'm happy with the action the feds have taken," says Szeto.
But not everyone will benefit from the Feds' actions, including first time homebuyers. Strict qualification requirements have made it harder than ever to buy a house. That's why some realtors are skeptical.
"You have to meet those certain guidelines that the banks require and if you don't meet those guidelines, I don't care if they give you zero percent interest rate, if you don't qualify, you don't qualify," says Marybel Rangel, from Real Estate Professionals.
Realtors expect the problem with loan qualifications to ease up, once the employment rate stabilizes.
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