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Will Lower Mortgage Rates Solve The Housing Crisis
Thursday, December 4, 2008
In an interesting move the Treasury Department is thinking about lowering mortgage rates to rates as low as 4.5 percent. Their thinking is that lower rates will lower the payments for home owners and help solve the foreclosure problem, there is just one main issue with lowering rates.
Lowering rates is not going to solve the foreclosure problem we currently reside in. Lower interest rates is just going to introduce more refinances into the market. It is not a bad thing to have people refinance their house as long as they have the equity to do so. But lower interest rates will probably not introduce thousands of now home buyers to the market, although I could be wrong.
One thing lower interest rates may help is the credit and lending world. The government said it would buy up to 500 billion in securities from Fannie, Freddie, and Ginnie Mae. If people start refinancing their homes, banks get to lend money and the government will back the loans, so a bad deal if you are considering buying or refinancing a home.