Mortgage rates will stay lower longer thanks to continued intervention from the Federal Reserve.
The Fed’s mortgage buying program, which was originally intended to terminate at year end, will be extended to buoy the flagging housing market.
“To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt,” the Fed said in a statement.
“The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010.”
There had been some concern that an immediate halt to the program in the coming months would bump mortgage rates by as much as one percent, denting a potential recovery that is fragile enough as it is.
“The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” the Fed added.