Lower U.S. mortgage rates lifted demand for mortgage applications last week, a trade group said on Wednesday, and demand should escalate after a new broad-brushed government plan to support the housing markets.
On Tuesday, the Federal Reserve and Treasury unveiled a plan to buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae, as well as up to $100 billion of debt issued by Fannie, Freddie and the Federal Home Loan Banks.
This massive infusion is expected ultimately to reduce U.S. mortgages rates further, as they have been hovering at high levels over risk-free government debt.
Average 30-year home loan rates fell to 5-1/2 percent on Tuesday after the government lifeline was announced, according to Bankrate.
Lower loan rates should help revive the worst U.S. housing market since the Great Depression.
Lower rates won’t hurt, but it won’t revive the housing market- It will only keep it on life support longer. It is important to remember that what is driving this downturn is the massive supply of homes that was built during the boom years. The supply was built for people who didn’t qualify for loans but got them anyway, as well as a supply for all the speculators. Continue reading Lower Mortgage Rates Won't "Revive" Housing Market