What the Government’s Purchase of Mortgage Bonds Means for Interest Rates and Homeowners

On Friday, the Federal Government said it would purchase $200 billion in mortgage bonds using cash reserves held by Fannie Mae and Freddie Mac. Already, several clients have contacted me to ask if this has caused rates to come down. Jack Krimmel, senior economist at Realtor.com, warns that a “one-time infusion of $200 billion is not likely to change the mortgage market’s long-term pricing”. Although $200 billion sounds substantial, it may be too small and uncertain in its execution to move markets in a meaningful way. Krimmel adds, “this could bring rates down in the short run by a small amount, but to really move mortgage markets, you would need large, sustained, and credible asset purchases.”

We did see mortgage rates come down slightly on Friday, and we will continue to monitor rates to let our current clients know if there is an opportunity to refinance and save money on their payments.

Lower rates would also help make homes more affordable for those looking to buy this Spring. On a $500,000 mortgage, the difference between 6.25% and 5.75% is $161/month, which is substantial.

Questions? Contact us today!