Will rates go down any further?

It seems they can and just might. The Fed has already lowered the rates they charge to lending institutions as much as they can. They still see a sluggish economy with weak employment numbers and growth, so the Fed appears ready to enter a second round of attempts to lower rates,   when the Fed begins to buy Mortgage Backed Securities (MBS’s) in earnest. They do that by paying more than the market price for MBSs, in essence pushing interest rates lower.

But why would the Fed do it? Perhaps because:.

  1. The Fed realizes that lower rates can better stabilize home prices. Lower rates mean borrowers can borrow more money based on their income, enabling them to pay more for a home which can slow the decline of prices, stabilize prices, and in a few areas even raise prices of homes.
  2. The Fed needs to look like they are doing something, anything to energize the economy or get consumer confidence turned around.
  3. The Fed has an agenda other than lower mortgage rates. Maybe the Fed is using the lowering of rates, in an effort to devalue the US Dollar abroad. By lowering the value of the dollar, our products become a better bargain to buyers overseas, thus stimulating the economy.
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