ESTATE


Lowering mortgage rates may have risks
2009/04/03, 7:51 pm
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The Federal Reserve has so far spent about $250 billion on low-interest mortgages acquired from lenders by Fannie Mae and Freddie Mac.

The purchases, which could eventually top $1 trillion, are one part of the financial buyout many people understand and support. This spending has driven mortgage rates to record lows, encouraged people to buy houses, and helped many people refinance out of lousy mortgages.

It all looks good on paper, but some economists are warning others about some risks. Here are a few of their concerns:

● The Fed is creating new money to pay for this, which will eventually encourage inflation.

● When the Fed stops buying, rates will increase quickly and substantially.

● Not too many investors are interested in the low-yielding mortgages, so it is likely taxpayers will have to foot the bill.

Source: The Wall Street Journal, Peter Eavis (04/02/2009)

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[…] Lowering mortgage rates may have risks « ESTATE […]

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Comment by faicyBoniaBal

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