Thursday, February 03 2011
Interest rates on home loans may drop further thanks to recent speculation that the Federal Reserve Board will inject about $600 billion into the consumer credit industry, according to a report in the Washington Post. Fed Chairman Ben Bernanke recently said this move could create mortgage rates that "will make housing more affordable and allow more homeowners to refinance."
However, other financial experts are careful to point out that this decline may not be as steep as some might expect, the report said. Amy Crews Cutts, deputy chief economist at Freddie Mac, said rates shouldn't be affected by the cash injection too greatly, noting, "Four and an eighth is far more likely than 4 percent."
The reason for this, Cutts told the newspaper, is that the Fed would be purchasing Treasury bonds rather than mortgage-backed securities. However, another dip in home loan rates would likely spur even greater levels of refinance, which already make up about 80 percent of the mortgage market.
Meanwhile, the low mortgage rates haven't helped to boost sales of existing homes. In fact, the most recent statistics from the National Association of Realtors showed that this type of purchase declined more than 25 percent in the third quarter.