Thursday, December 04, 2008

Treasury Weighs Plan To Cut U.S. Mortgage Rates : NPR

Treasury Weighs Plan To Cut U.S. Mortgage Rates : NPR:
"The Treasury Department is considering a plan to dramatically lower mortgage rates for homebuyers to as low as 4.5 percent — more than a full point below currently offered rates, sources say."
It seems that this would be done by the government buying up mortgages much like the Fed recently said they were going to do. One problem, as the piece suggests, is that if this idea is allowed to hang around without action it may have the reverse effect since buyers may wait for the lower rates much like deflation.
"Why should I buy a house today with a 5.5 percent mortgage rate if I can wait a month or two and buy it with a 4.5 percent mortgage rate?" says David Kotok, chief investment officer at the money management firm Cumberland Advisors.

So, he says, the government really can't take much longer to announce what's its planning to do."

CNN adds a very troubling aspect:
"Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said."
It is almost certain that the lobbyists and other industry groups are made up of people and as such they are looking out for what is the best for them, not necessarily the country. (And I can not stress enough I do not know enough about this to be in favor or against it. My prior is still less government intervention is better, but do not know the details so will be quiet). And weren't really low rates (almost artificially low) cited as one of the causes of the orginal real estate bubble. How will it be different this time is a big question that needs to be answered.


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