Fed’s Cash Injection Likely to Keep Mortgage Rates Favorable

Along with the election results, the big news recently was the Federal Reserve’s announcement that it will attempt to jumpstart the economy by purchasing another $600 billion in long-term Treasury bonds through mid-2011.

While this announcement was not unexpected, it has been widely debated whether the plan will actually bandage the economy and raise employment through easier lending. Stocks gained immediately after the announcement, helping Standard & Poor’s 500 Index to break through its April peak to rise to its highest level since September 2008.  

According to an Op-Ed written by Fed Chairman Ben Bernanke and published by the Washington Post, the results will be favorable for the mortgage industry. “Easier financial conditions will promote economic growth,” said Bernanke. “For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance.”

Greg McBride, a senior financial analyst at Bankrate.com, wrote that the news is good for homebuyers and refinancers. While the rates are not likely to drop from their already low levels, they will probably not go any higher.