The Fed announced a new plan today that will likely compress mortgage interest rates even further. Here is an excerpt from a HousingWire piece on the subject:
The committee also said “to help support conditions in mortgage markets” it will reinvest principal payments from agency debt into agency mortgage-backed securities.
That’s a departure from the Federal Reserve’s previous practice of reinvesting those proceeds into Treasuries and appears to be an effort to lower mortgage rates.
The purchase program, to be completed by the end of June, will involve longer-term Treasury securities with remaining maturities of six years to 30 years, and will be financed through the sale of shorter-term Treasuries with maturities of three years or less.
“This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the FOMC said in a statement following its two-day meeting.
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