Long-term mortgage rates were pushed downward last week as the Fed continues to aggressively provide liquidity to the struggling credit markets. The Fed slashed interest rates again by 3/4 of a point and announced direct lending to troubled financial institutions. The Office of Federal Housing Enterprise Oversight (OFHEO) also announced an initiative that should enable Freddie Mac and Fannie Mae to pump $200 billion into the mortgage market. This helped drive rates down, as Freddie and Fannie will be able to buy more loans. Experts expect loans purchases to happen faster now.
We could see long-term mortgage rates continue to drift downward this week as the market continues to absorb the moves from the Fed and OFHEO. While there is no question that the economy has slowed, the question will be whether all the recent efforts to stimulate the economy will have the desired effect, and how quickly it will happen. One downside of this stimulus may be an unwanted jump in inflationary pressures. If inflation springs upward, mortgage rates will start to climb upward.
Paul Cantor is is a mortgage planer at TrustMor Mortgage Company in Geln Allen, VA. He is a frequent speaker at local real estate financing forums. He may be reached at (804) 433-1510. or at www.PaulCantor.com
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