4.5% fixed rates coming soon?? Is it real??

SPECIAL UPDATE:

4.5% loans for PURCHASING A HOME COMING SOON???

Government officials have been under enormous pressure to help stabilize home prices and prevent foreclosures. At the same time, they don't want to appear to be using taxpayer money to bail out undeserving individuals and institutions. As Fed Chief Bernanke stated, the solution may involve a "full range of coordinated measures" aimed at different aspects of the problem.

The government has already put many programs in place, and others are under discussion. The Fed and the Treasury have used billions of dollars to provide financial institutions with capital to make loans. Last week, they instituted a program to buy MBS to push mortgage rates lower.

Yesterday, the Treasury announced that it is considering a plan which would offer below-market mortgage rates for some loans used to purchase homes. The program being discussed involves the Treasury investing in MBS guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac, which contain purchase money loans at a specified rate (4.5% was the initial proposal).

What we are hearing is that the lower rates will not be available for refinancing loans. So if you are holding out because you've heard 4.5% on the news, you may be missing the current boat, as 30-year rates today are about 5.25% with no discount points TODAY.

How this works requires a little bit of explaining. Typically we see the spread between the 10-year Treasury and a 30-year fixed of about 1.75%. Call this what banks "pay" for their money and their "markup" to the consumer. Based on the market today, the 10-year Treasury is about 2.625%. Add 1.75% to that, and we should be seeing fixed rates about 4.40%.

Lately, because the banks have been under so much financial pressure, the spread has been artificially held higher because the banks are in trouble, and because of the perceived perception of risk of defaults on home loans. The idea then simply behind this proposal is that the government (YOU) will buy mortgage-backed securities with a more traditional 1.75% spread.

Wanna gamble? Go to Vegas! Real and guaranteed rates in the low 5% range are here right now for refinances for those with good loan-to-value and good credit. Take it and run! Holding out for a little more for most people, when the likelyhood is actually very small of lower rates, just doesn't make sense.

If you are looking to buy a home, a nice home buyer Christmas present "may" be coming. But again, understand that historic rates are HERE TODAY, so GO BUY A HOUSE!

Stay tuned. COME BACK AND READ MY BLOG OFTEN FOR MORE INFORMATION. This could get interesting!

NOTE: This is an informational article, and not an advertisement for credit as defined by paragraph 226.24 of regulation Z. Please call us for a personal rate and APR quote based on your individual situation.