Fed’s purchase of mortgage-backed debt may further lower mortgage rates

September 13th, 2012

The Federal Reserve will purchase $40 billion in mortgage-backed securities each month to drive down borrowing costs.

Mortgage rates are currently hovering near unprecedented lows, and the Federal Reserve Board's decision to purchase additional mortgage-backed securities may reduce mortgage rates further.

That feeds into the results of a new Reuters poll which revealed that home prices are expected to see a modest growth in the coming years as the housing market slowly recovers. According to the poll, 35 out of 38 economists agreed that the market is recovering. However, most note that although home prices are strengthening, the gains will remain slow through the years.

If mortgage rates are lowered further, the move may make homeownership more affordable for Americans.

Housing analysts have expressed some doubts over whether another stimulus package will spark home purchases, arguing that tight lending restrictions and a lack of confidence in the economy are the primary reasons that more borrowers are not coming forward. However, those who consult a mortgage service company may be in a better position to find affordable homes and lenders that are willing to extend credit lines based on borrowers' particular credit standings and incomes.