In a speech earlier this week, Treasury Secretary Henry Paulson said: "The most important thing we can do to mitigate foreclosures and progress through the housing correction is to reduce the cost of mortgage finance, so more families can afford to buy a home and so homeowners can refinance into more affordable mortgages." Today, rumors are flying around Washington that, perhaps as early as Monday, the Treasury will announce a plan that would lower mortgage rates to 4.5% for 30 year, fixed rate loans.
The hope is that, with rates historically low, more buyers will have the incentive to buy now. This would decrease the oversupply of housing stock and stabilize prices. Homeowners who are struggling with loan payments will be able to refinance to a more sustainable payment, thus stemming foreclosures. It would also address the criticism that the present bailout is only addressing the problems of financial institutions, not individuals.
No one is saying anything "officially". But it has been my experience that these sorts of leaks don't happen unless plans are already in the works. The specifics may be tweaked, but I expect to see some sort of announcement next week. Now that's what I call a nice holiday present!
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