Mortgage Rate News

One of the big issues right now is that mortgage interest rates have been higher than they should be. With the credit market crisis causing wariness on the part of mortgage lenders, interest rates have been somewhat high. Now, though, there is a plan to try and get mortgage interest rates down. Mortgage News Daily offers this on a plan proposed by the Treasury Department:

The plan under review might lower rates to the 4.5 percent range and would be in addition to a program announced last week wherein the Federal Reserve will purchase up to $600 billion of debt either issued or backed by Freddie Mac, Fannie Mae, Ginnie Mae, and the Federal Home Loan Banks.  That program is already having an effect on mortgage rates which have dropped and caused investors to pay more attention to the stocks of banks and home builders.

Here’s the problem though: It might not actually help the housing market. Sure, it could help some homebuyers who manage to get approved by loans, but a plan to lower fixed-rate mortgage does nothing to help prevent foreclosure. ARM rates may drop, but for many people, it will only delay the inevitable for a few more months. And, of course, forcing mortgage lenders to offer lower interest rates does nothing about forcing them to actually start lending. Banks are remarkably reluctant to lend, and many a home under contract has fallen through as something doesn’t turn out just right.

Some, however, think that the lower interest rates could mean that a housing market bottom will soon present itself. And, while the lower rates may encourage buyers, they will have to be well qualified and have substantial down payments. Without the added help that would come from preventing foreclosures, though, I’m not sure that a housing market bottom really will be reached anytime soon.