The intervention of the Fed last week caused mortgage rates to drop dramatically. It is now very possible to get an FHA or VA loan with an interest rate of 5.5% if conditions are right. Only a week ago the same borrower who can now get a 5.5% loan would have been looking at a rate of 6.25%+. But will these low rates last? Reports are coming out of a plan being circulated that might lower interest rates for for a sustained period in an effort to stabilize to sinking housing market and give more people incentive to buy homes. Here is a report on that idea over at the Wall Street Journal. And here is a quote from Treasury Secretary Hank Paulson on the subject:
“The most important thing we can do to mitigate foreclosures and progress through the housing correction,” Mr. Paulson said in a speech Monday, “is to reduce the cost of mortgage finance, so more families can afford to buy a home and so homeowners can refinance into more affordable mortgages.”