The government continues to say that it has to address the problems in the housing market. According to news reports, the Treasury Department is considering a plan to drive down mortgage rates as low as 4.5% to help stimulate the housing market.
"Treasury officials said that the [buydown] plan could be a more effective way to help home owners than focusing solely on borrowers who are struggling to meet their monthly payments," the Washington Post story says.
Under the Treasury plan, lenders would sell newly issued mortgage-backed securities to the government provided the interest-rate on the loans collateralizing the securities was no higher than 4.5 percent.
I think that lowering the interest rates are always a good idea. However, if they think this will bring buyers back into the housing market I think they have missed the boat. Interest rates are currently hovering around 5%. This is a historically low interest rate and still we lack enough buyers to impact the excess inventories.
Why? The banks are still not lending money. Until the lending institutions begin to loan money more freely we will not see a turnaround in the housing market.
We have all heard about the credit freeze for a couple of months now. Everybody in Washington is talking about ways to get our economy on track. But, I still haven't had a single buyer prospect qualify for a loan since September of this year.
I don't care if mortgage rates are at 4.5%. If the standards at the lending institutions are so high that credit worthy middle class Americans can't get a loan it isn't going to have any broad positive impact.
It's all about cash flow, not interest rates!
David C Recker, Associate Broker, Realtor ® licensed in North Carolina. Reach David at: 252-442-2687
Copyright © 2008 By David C Recker, NC Real Estate Web Blog. All Rights Reserved.. * Lowering The Mortgage Rates Isn't The Answer*
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the lower rates have started to help build a floor to our sliding prices here in my market. Credit is not as large an issue as it is in the US, prices have been the bigger obstacle.