Hold off on that rate lock. The government is here to help.
I initially thought this massive government purchase of defaulted mortgage proposal would lead to higher mortgage rates, but quickly reversed course. Here's me today, on Zillow Mortgage Blog:
This action is an obvious attempt to stabilize the volatile mortgage market. His rationale is that this plan (a massive MBS purchase) will cost the taxpayers a lot less than the alternative. Whether or not that’s true remains to be seen. He specifically references the “spread” or yield difference between treasury notes and mortgage-backed securities. If the US Treasury is going to buy mortgage-backed securities to narrow that spread, rates will drop in the near term.
I think we'll see conforming 30-year fixed rates work down to 5.75% or below, next week. Stay tuned.
