Average Mortgage Rates Lower Due to Government Actions?
Posted on | June 19, 2009 | 5 Comments
Make sure to use Subprime Blogger to get all your mortgage news. We also offer information on current mortgage rate trends and the overall direction of interest rates.
Average mortgage rates have been all over the map lately, mostly due to government actions. Over the last three months the government has bought back trillions in mortgage backed securities as well as auctioning billions in debt through treasury notes. These two actions have caused mortgage rates to stay artificially low as the government is doing everything in their power to put a ceiling on average rates. This is very bad news for the long term though.
If and when the economy gets better mortgage rates are eventually go the be set by the free market. If this is the case, we are likely to see mortgage rates MUCH higher than they are now. When this happens, we will see another drop in home prices as higher mortgage rates will cause sellers to drop their prices. The sad part about it all is that this is likely to happen when most of America feels that the housing market is finally getting better.
The most troubling issue I see is that it may take MANY years for the housing market to find a bottom and the whole time the government is going to continue to try to force average mortgage rates lower. Well, the longer it takes, the more of a whiplash effect it is going to have. We could see average mortgage rates go up two or three percent in less than a year if this continues. Eventually the government is going to run out of ammo and the foreigners are going to stop buying our bonds and paper money. It is very bad news when this happens, but maybe that is exactly what we need right now.
Tags: average mortgage rates > government mortgage rates > government setting rates > mortgage news
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June 19th, 2009 @ 11:21 am
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