Friday, December 19, 2008

Mortgage Financing on the Cheap... Will It Work?

Bloomberg reports:

The average rate on a fixed 30-year mortgage fell to 5.18 percent last week from 6.47 percent in October, according to Mortgage Bankers Association data.
Looking at daily data, I'll go ahead and project that next week's figure will look much better. After the Fed announced Tuesday they would be buying mortgages, rates tightened another 60-70 bps to a rate of ~4.4% (according to Barclays)!

Funny thing is... at this point the rate cut to prop up housing feels an awful lot like OPEC oil cuts to prop up the price of oil, with the obvious difference being trying to stimulate demand vs. halt supply?

My question... will either work in the short run?