Mortgage Rates Dropping, Treasury Plan Aims to Push Rates Down, Down, Down
December 05, 2008 20:56 Filed in: News
Before the economy entered a total nosedive, the
first signs of real estate problems began with the
credit crunch and out-of-control mortgage rates.
Starting 18 months ago, mortgage rates began to spike
-- especially for jumbo loans over $417,000.
Over the last few weeks, mortgage rates have dropped significantly. While jumbo loans are higher, lending standards are stricter, and down payments are required, rates are once again becoming very attractive. According to Zillow, the average rate on a conventional 30-year loan is now 5.42%. On 15-Year loans the rate is now 5.11% -- and some 15-year loans can even be found for under 5%.
As mortgages continue to drop, the Treasury Department has begun to circulate a proposal for the government to boost the sagging U.S. real estate market by backing programs that would drop 30-year conventional mortgage rates nationally to as low as 4.5% for new home purchases. These rates would mark historic lows and would certainly drive new buyers into the market.
For downtown Austin, falling rates and new low rate programs would certainly spur demand, helping to fill out vacancies in many of the projects currently under development. These changes would be unlikely, however, to effect the tight commercial credit and investment markets, still making it hard for developers to bring new unfunded projects to market.
Here is the summary of the Treasury program from CNN:
NEW YORK (CNNMoney.com) -- Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said.
Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac. Details on the plan remain sketchy, but an announcement could come as early as next week, the source said.
The increased demand for mortgage-backed securities would prompt mortgage rates to drop. That, in turn, would enable homeowners to refinance into lower-cost loans and make it cheaper for potential homebuyers to get into the market.
Spokeswomen from Treasury and the Federal Housing Finance Agency, which oversees Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), declined to comment.
Last week's Fed move drove mortgage rates down to 5.5%, from 6.06% a week earlier. The Fed said on Nov. 26 that it would purchase up to $500 billion in mortgage-backed securities from Fannie, Freddie and Ginnie Mae, and that it would buy another $100 billion in direct debt issued by those firms.
Mortgage applications more than doubled as a result, the Mortgage Bankers Association said Wednesday. Much of the activity stemmed from homeowners looking to refinance.
Industry groups have been pressuring President-elect Barack Obama and lawmakers to lend a helping hand to the housing market. The National Association of Realtors, for instance, has called for Treasury to buy mortgage-backed securities.
Meanwhile, a coalition of industry groups have banded together under the "Fix Housing First" banner to call for measures including tax credits of up to $22,000 and the creation of a 30-year mortgage, carrying rates as low as 2.99%.
Over the last few weeks, mortgage rates have dropped significantly. While jumbo loans are higher, lending standards are stricter, and down payments are required, rates are once again becoming very attractive. According to Zillow, the average rate on a conventional 30-year loan is now 5.42%. On 15-Year loans the rate is now 5.11% -- and some 15-year loans can even be found for under 5%.
As mortgages continue to drop, the Treasury Department has begun to circulate a proposal for the government to boost the sagging U.S. real estate market by backing programs that would drop 30-year conventional mortgage rates nationally to as low as 4.5% for new home purchases. These rates would mark historic lows and would certainly drive new buyers into the market.
For downtown Austin, falling rates and new low rate programs would certainly spur demand, helping to fill out vacancies in many of the projects currently under development. These changes would be unlikely, however, to effect the tight commercial credit and investment markets, still making it hard for developers to bring new unfunded projects to market.
Here is the summary of the Treasury program from CNN:
NEW YORK (CNNMoney.com) -- Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said.
Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac. Details on the plan remain sketchy, but an announcement could come as early as next week, the source said.
The increased demand for mortgage-backed securities would prompt mortgage rates to drop. That, in turn, would enable homeowners to refinance into lower-cost loans and make it cheaper for potential homebuyers to get into the market.
Spokeswomen from Treasury and the Federal Housing Finance Agency, which oversees Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), declined to comment.
Last week's Fed move drove mortgage rates down to 5.5%, from 6.06% a week earlier. The Fed said on Nov. 26 that it would purchase up to $500 billion in mortgage-backed securities from Fannie, Freddie and Ginnie Mae, and that it would buy another $100 billion in direct debt issued by those firms.
Mortgage applications more than doubled as a result, the Mortgage Bankers Association said Wednesday. Much of the activity stemmed from homeowners looking to refinance.
Industry groups have been pressuring President-elect Barack Obama and lawmakers to lend a helping hand to the housing market. The National Association of Realtors, for instance, has called for Treasury to buy mortgage-backed securities.
Meanwhile, a coalition of industry groups have banded together under the "Fix Housing First" banner to call for measures including tax credits of up to $22,000 and the creation of a 30-year mortgage, carrying rates as low as 2.99%.