Refinance rates likely to stay low thanks to Bernanke

Ben Bernanke helped boost the stock market this week with news out of the latest FOMC meeting that the Fed would be adding over one trillion dollars into the secondary market and would be purchasing treasuries and mortgage backed loan securities. This move should be a great boost to the beleagured mortgage and housing industry as it all but guarantees that fixed rate mortgage loans are likely to remain near historic low levels for the near future. The average rate on a 30 year fixed rate mortgage loan according to Freddie Mac, one of the nations largest agency lenders was near 5% with a little over half of a point to fix in this interest rate. Most economists and mortgage experts believe that the Fed move could help to drop this rate even lower and this could turn into a significant boost for the housing market as it would help to lower rates and payments for home owners who are able to refinance as well as help to provide the home buying industry with a boost by keeping house payments extremely low.

The Feds bold move was their second attempt to help and jump start mortgage lending. In late 2008 the Fed made a similar move and agreed to purchase up to $500 billion of mortgage securities from Fannie Mae and Freddie Mac. This news helped to immediately lower fixed mortgage rates by almost one full point and led to an immediate refinance boon for the banking industry. The Feds actions this time around should help to keep the momentum for the banks through refinance applications, but also could help to ensure that the summer housing market has the best chance to reverse the downward housing cycle. This summer could be a pivotal period for the restabalization of the housing market. The opportunity to lock in a fixed rate mortgage loan at historically low rates, government rebates and a tremendous surplous of housing could become the catalyst to bring home buyers back into the market place at an improved pace.