The Return of the Free Market Mortgage
Smart Money
By Lisa Scherzer
...THE FEDERAL RESERVE'S program to buy $1.25 trillion in mortgage-backed securities appears to have stabilized the housing market. Mortgage rates have been contained. That, in turn, has made homes more affordable -- and put the brakes on the housing market's plunge.
Rates on a conforming 30-year fixed loan dipped below the 5% mark last week, the fifth time they have done so this year, according to HSH Associates, a mortgage-tracking firm. Meanwhile, the S&P Case-Shiller home price index September reading showed a fifth consecutive month of gains with prices in 20 metropolitan areas rising a modest 0.3%, though prices overall recorded an 8.9% decline from a year ago.
But what will happen to mortgage rates when the Fed stops manipulating the market? The central bank has already extended the purchase program once, so it will now expire in March 2010 rather than the end of 2009. "The question is: Are they really going to stop the program next year?" says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California.