Friday, December 26, 2008

Mortgage Market's Gains Stick

One of the most important developements of the past month has been the stabilization of the mortgage market, which was spurred by the Federal Reserve's Nov. 25 announcement of a plan to purchase $100 billion of agency securities and $500 billion of mortgage-backed securities.

The stabilization, which is evident in the huge decline that has occurred in mortgage rates, will almost certainly help ease what has clearly been the biggest part of the financial crisis. This is already apparent in the recent jump in mortgage refinancings, which last week reached their highest in five years. Homeowners have been enticed by the 1.3-percentage-point decline in mortgage rates seen since earlier November, with the 30-year fixed-rate now at an average of 5.14% in the U.S., a record low.

Gains seen in the mortgage realm have held in recent weeks, and today's market shows more of the same, with mortgage-backed securities trading higher on the day and rates down about 9 basis points, although today's rates are within their recent trading range.

If 2009 is to be better than 2008, the mortgage realm must stay healthy to both help clear home inventories and relieve strapped homeowners. If President Obama brings forth a plan to spur home buying, a major dent can be made in the housing crisis.

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