After a prediction that I read a few weeks ago that mortgage interest rate may climb up again this year, I just found another article on Bloomberg saying that mortgage rates may actually continue to fall to a lower point than the interest rate in World War II. The annual mortgage rate back in 1945 was 4.7%, according to a book published by Rutgers University Press, A History of Interest Rates. Now it is predicted to fall to 4.5%.
This fall is triggered by the announcement by Federal Reserve to “buy up to $300 billion of treasuries and increase purchases of mortgage-backed bonds” as reported by Bloomberg.
In the announcement by the Federal Reserve on March 18th, 2009, it is explained that they will buy up another $750 billion of mortgage-backed securities in order to back up home lending. This buy up will make it possible for banks to reduce interest rates while still profiting from sales of securities.
During the past few weeks applications for mortgage loans have increased constantly as the interest rates continue to fall. Lower borrowing costs led to a surge in refinancing. Unfortunately for applicants who have lost their jobs or are going to lose their jobs low mortgage interest rates will not be enough to be approved for a first mortgage loan or a refinance.
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