MBS Purchase Update

Posted on December 30, 2008. Filed under: Interest Rates | Tags: , |

The Federal Reserve confirmed their previously mentioned plan to buy Mortgage Backed Securities to drive down mortgage rates and prop up the ailing housing industry.  How MBSs change rates can be found here https://michaelpfeffer.wordpress.com/rate-basics/.

Beginning early January the Fed will begin a continuous purchase program that will include 15, 20 and 30 year products.  How far they can drive down rates is yet to be seen but this will be a consistent effort that will be managed by private firms chosen by the government.  Expect easing rates in 2009.  How far will mortgage rates drop?  No one knows for sure but it seems the Fed finally fully understands that recovery in the housing market is necessary and must precede recovery in other sectors.


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