Fed to purchase $40B in mortgages a month: VIDEO

Third round of quantitative easing could force mortgage rates lower

New York /
Sep.September 13, 2012 03:00 PM

The Federal Reserve said it would initiate a third round of quantitative easing by buying $40 billion worth of Freddie Mac and Fannie Mae mortgage backed securities each month, Bloomberg News reported. The acquisitions are aimed at keeping down long-term interest rates, including those for home loans, so that spending and hiring will increase, Chairman Ben Bernanke said (see video above).

Combined with the money it already pours into the agency mortgage market, the Fed estimated it would be spending approximately $85 billion per month through the end of the year. Overall, it remains to be seen how the announcement will impact already-low mortgage rates, according to CNBC. In the first round of quantitative easing, which also involved buying agency securities, mortgage rates dropped 85 basis points between Thanksgiving and the end of the year in 2008. The second round, in 2010, had the opposite affect, although the Fed was purchasing Treasury notes at that time, which stoked fears of inflation, CNBC said.

Analysts quoted by both CNBC and Bloomberg expected the Fed to announce a purchase of more than $300 billion worth of securities. However, with the open-ended announcement of a monthly figure, it’s unclear how mortgage rates will be impacted. Before the plan was released CNBC speculated that if the announcement exceeded the expected $300 billion-plus in purchases, mortgage rates would fall. If the quantitative easing fell below expectations, rates would rise. [CNBC] and [Bloomberg]Adam Fusfeld


Related Articles

arrow_forward_ios
New Fannie Mae and Freddie Mac restrictions mean higher mortgage rates for some. (Unsplash)
Mortgage rates on second homes rise as Fannie, Freddie pull back
Mortgage rates on second homes rise as Fannie, Freddie pull back
Jerome Powell (Getty)
Powell sees new opportunity to reform low-income lending rule
Powell sees new opportunity to reform low-income lending rule
Meridian Capital Group CEO Ralph Herzka, Former Freddie Mac CEO David Brickman and  Barings CEO Mike Freno (Herza by Studio Scrivo; Brickman by Freddie Mac; Freno via Barings)
Ex-Freddie Mac boss looks to become top agency-backed CRE lender
Ex-Freddie Mac boss looks to become top agency-backed CRE lender
Former Freddie Mac CEO David Brickman and Meridian Capital Group CEO Ralph Herzka (Freddie Mac; Herza by Studio Scrivo)
Ex-Freddie Mac CEO launching lending platform with Meridian, Barings
Ex-Freddie Mac CEO launching lending platform with Meridian, Barings
Treasury Secretary Steven Mnuchin with Donald Trump. (Getty)
Treasury quits bid to privatize Fannie Mae, Freddie Mac
Treasury quits bid to privatize Fannie Mae, Freddie Mac
FHFA director Mark Calabria (Getty; iStock)
Federal housing agency extends forbearance options for multifamily landlords
Federal housing agency extends forbearance options for multifamily landlords
Future of Fannie, Freddie privatization is uncertain
Future of Fannie, Freddie privatization is uncertain
Future of Fannie, Freddie privatization is uncertain
(iStock)
Foreclosure filings are way down. There’s a reason
Foreclosure filings are way down. There’s a reason
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...