Mortgage Rates Drop on Plan Announcement by the Federal Reserve

September 22, 2011 / Russell Legato, Residential Property Analyst

In an effort to get the sluggish US economy back on its feet, the Federal Reserve announced a new plan yesterday called Operation Twist.  This effort is aimed at the housing market and more specifically at interest rates.  The plan involves selling Treasury securities that are about to mature by June of next year and buying Treasury securities with maturation dates much farther down the road.  The goal of this project would be to force mortgage rates down even farther.  As of the announcement yesterday the plan seems to be working as interest rates fell after the announcement was made.

Mortgage Rates Drop on Plan Announcement by the Federal Reserve

Whether or not this plan would really help the economy was the question of the day.  Mortgage rates have been at their lowest for almost a year and it hasn’t helped.  Many find that even though the rates are low they don’t qualify to refinance.  With the market value of homes being so low, many just don’t have the equity needed to get a new better rate.

But at least as of right after the announcement the rates dropped for most mortgage lenders.  Some dropped only an eighth but others dropped more.  The rate for a new mortgage seems to be about 3.87% for a 30 year fixed loan.  The Government is trying to help the economy to grow while the average person is  uncertain about the future and is therefore cutting their spending and trying to save more.  It may just take more time for the economy to turn around.

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