posted by SooYeon(Pia), Shin
March 19 (Bloomberg) -- U.S. mortgage rates may fall to the lowest since World War II on the Federal Reserve’s plan to buy up to $300 billion of Treasuries and increase purchases of mortgage-backed bonds.
Rates for 30-year fixed home loans dropped to 4.98 percent this week, Freddie Mac said today. They may reach 4.5 percent as the Fed’s purchases progress, said Mike Larson, real estate analyst at Weiss Research in Jupiter, Florida.
“It’s a big bullet the Fed’s firing here,” he said. “The Fed is kind of going all in.”
U.S. central bankers said yesterday they will buy up to an additional $750 billion of mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae to support home lending. The Fed is trying to lower rates by reducing the supply of outstanding mortgage bonds, boosting their price and lowering yields. That would allow banks to reduce the rates on new mortgages and still sell mortgage securities at a profit.
The Fed announced a program in November to buy $500 billion of mortgage-backed securities guaranteed by Fannie, Freddie and Ginnie Mae. That helped drive 30-year fixed mortgage rates down to 4.96 percent during the week ended Jan. 15, the lowest since Freddie Mac began keeping track in 1971.
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