The Fed is going to purchase mortgage bonds. The Federal Reserve just announced that it would purchase $600 billion worth of Mortgage Backed Securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. This move by the Fed is designed to help increase the availability of credit while lowering fixed rate mortgages. And this move is already lowering mortgage rates so far today as mortgage bonds are up a whopping 128bp and appear to be destined to retest the price highs of 2008. In addition to purchasing debt backed by Fannie and Freddie, the Fed will set up a $200 billion program to support consumer and small business loans. The Fed looks for the plan to create liquidity in the auto, student and small business loan market.
30 year Conventional rate/over $100k 5.375%
30 year FHA loan/over $100k 5.500%
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