We wrote last week about the disconnect between Mortgage-Backed Securities (MBS) and 10 year Treasury Bonds. Typically a spread of about 1.5% had risen to almost 3.

As of today, we may be on a slide back to more normal conditions, and that is great news for mortgage rates. So why is this happening?

The Federal Reserve just announced that it would purchase $600B of MBS backed by Fannie Mae, Freddie Mac, and Ginnie Mae.  This is a BRILLIANT move by the Fed. It is designed to help increase the availability of credit, while lowering fixed mortgage rates. 

Last week you read here that mortgage rates were higher than they should be because to investors they were the investment world's shark infested waters. The Fed action has shouted to Wall Street, "Come on in! The water is fine!"

And they have.

So far today as Mortgage Bonds are up a whopping 128bp and appear destined to retest the price highs of 2008.

In addition to purchasing debt  backed by Fannie and Freddie, the Fed will set up a $200B program to support consumer and small-business loans. Hopefully, the plan will create liquidity in the auto, student and small business loan market.

You can read more about it here...

What this all represents is a rare opportunity for consumers to lower the rates on their mortgages. It may be the perfect time for those looking to get out of Adjustable Rate Mortgages (ARMs). As of today, Tuesday the 25th, 30 year fixed loans are available, WITH NO CLOSING COSTS, at rates as low as 5.9%. Wow!

Details on all this are available from us. Visit the Willamette Falls Financial link on the left hand side of the page and give us a call.