4.5% Mortgage

The big news the in the headlines this week is the possibility of mortgage rates dropping to 4.5% in order to boost housing sales. I am very excited about the possibility of this program. It will give an incentive to buyers to get in the market, help reduce standing inventory and have a far reaching economic ripple effect. If first-time homebuyers start buying, this enables those who desire to move into a higher-priced home, the ability to do so; thus, causing a positive chain reaction. The program will be limited to home purchase only. The program might be attractive to lawmakers because it has the ability to get the economy back on track by fixing the housing problem with out bailing out homeowners and lenders. This program will need support from key lawmakers and the incoming Treasury Department Chairman. However, right now the program is still a “pie in the sky.”

Additionally, Bernanke has been in the news asking for more assistance from public funds stating that the private sector is unable to fix this mess on its own. He also feels the central bank can not fix the economy solely through rate cuts and emergency lending programs. The FDIC Chairman is calling for part of the $700 billion bailout to be used quickly for loan modification to prevent further foreclosure. It is wonderful to see all these ideas coming forward to attempt to fix the crisis. However, I feel we need more coordinated efforts across all organizations and the government. Maybe it is time for the President-elect Obama to step forward a take an active roll in getting everyone on the same page. Only time will tell!


Interest Rate Trend Forecast
Short Term (Next 20 Days) - Steady interest rates
Long Term (20 days out and greater) – Fractionally lower interest rates


Sources:
http://www.marketwatch.com/news/story/treasury-may-set-mortgage-rates/story.aspx?guid=%7B2997E462-B056-43E3-AF13-70EB82403632%7D&dist=msr_27

http://www.bloomberg.com/apps/news?pid=20601068&sid=abINDLzbaE54&refer=economy#

Market Alert by Larry Baer