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Mortgage Rates Drop On Stimulus News

STEVE INSKEEP, host:

There was some good economic news yesterday as mortgage rates tumbled, in some cases by more than half a percent. That was in reaction to the government's latest financial stimulus plan. Many interest rates are now below six percent. As NPR's Wendy Kaufman's explains, the lower rates were engineered by the Federal Reserve.

WENDY KAUFMAN: For months, the federal government has been trying to make more money available for home mortgages, but it hasn't worked very well. So yesterday, the Federal Reserve said it would buy as much as $600 billion of debt, including mortgage-backed securities issued by Fannie Mae and Freddie Mac. The goal is to increase the availability of credit for home mortgages, decrease the cost, and help stimulate the overall economy.

The impact on mortgage rates was immediate and stunning. At Seattle-based HomeStreet Bank, for example, rates fell to five and a quarter percent. Susan Greenwald, a senior vice-president at HomeStreet, said the payment on a 30-year fixed $400,000 loan would be about $125 a month less than it had been. More people would be able to buy homes, and those who refinance would have more money in their pocket.

Ms. SUSAN GREENWALD (Senior Vice-president of Single-Family Lending, HomeStreet Bank): I think the other thing that this can do is it can provide an increase in confidence to consumers. If consumers can come in and refinance and lower their payment, they're seeing something positive happen.

KAUFMAN: Greenwald said they had a record number of new loan applications yesterday, some $30 million worth. Wendy Kaufman, NPR News, Seattle. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Wendy Kaufman