Federal Reserve Drives Rates Even Lower

The Federal Reserve announced a plan last week to spend a half-trillion dollar buying up mortgage-backed securities.

As the new year dawns, the Fed's action has driven down interest rates on new mortgages and rates are expected to fall further.

The Fed said that it would start buying mortgage bonds early this month.

“The program stands to drive mortgage rates even lower, possibly to 4.5 percent," said Derek Chan and Nicholas Strand, strategists at Barclays Capital in a note.

"That's a huge deal for this mortgage market," said Kevin Cavin, a mortgage strategist with FTN Financial.

Source: The Wall Street Journal, Prabha Nataraian (01/02/2009)