The Federal Reserve Pulls Out the Stops

The Federal Reserve illustrated that, even with the federal funds rate nearly at zero, it still has more tricks to pull out of its hat by taking unprecedented steps toward supporting mortgage lending and the housing market. Along with purchasing $300 billion in Treasury securities, the Fed promised an additional $750 billion on top of the $500 billion it has already committed to purchasing mortgage-backed securities.

When the Fed first announced that they would purchase these securities a few months ago, interest rates fell by 1%. After the most recent announcement, rates fell by nearly a quarter of a percent from 5.03% on March 12 to 4.78% on April 2. Some banks are extending loans at around 4.5%.

Estimated Payment on a $200,000 Mortgage
InterestRate    Monthly Payment
8.5%              $1,538
4.5%              $1,013
6.5%              $1,264

Monthly Payment = Principal and Interest Portion Only