Mortgage rates are hovering at historic lows largely due to implementation of the third round of quantitative easing (QE3). This program, recently orchestrated by the Federal Open Market Committee (FOMC) involves purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.
In an additional effort to keep borrowing costs down and spur economic growth, the FOMC announced it would continue Operation Twist through the end of the year. The plan entails selling $400 billion in short-term Treasurys in exchange for the same amount of longer-term Treasurys.
The FOMC noted that “these actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” according to a statement.
This is timely news particularly for a housing market that’s healthier than many realize. According to Trulia, on average, buying a home is now 45% cheaper than renting in the100 largest metro areas in the nation (providing the homeowner plans to stay in the home for the national average time of seven years). That’s a savings of $771 every month!
At the same time, housing prices are now posting solid gains. According to the most recent CoreLogic data, year-over-year home prices have increased 4.6% since August 2011. And according to its most recent Housing Markets Insights report, investment bank Morgan Stanley anticipates a 2012 housing price increase of 7% to 9%.
from Prospect Mortgage Industry Insider