Mortgage Applications Rise as Fed Mulls QE3

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(eToro Blog) The Mortgage Bankers Association reported that applications for U.S. home mortgages rose last week due to increased demand for purchases and refinancing. The seasonally adjusted index of mortgage applications increased 4.5% last week. Refinancing applications increased 3.3% and number of loan requests for home purchases grew 8.1%. Mortgage rates are at historically low levels due to the Federal Reserve’s Operation twist. 30 year mortgage rates averaged around 4.11% last week.

Federal Reserve chairman Ben Bernanke has been the architect behind boosting home sales. The Fed has held interest rates near zero since 2008. It has purchased $1.25 trillion of mortgage backed securities as part of Quantitative Easing (QE). The Fed is also reinvesting proceeds from the mortgage debt into home loan securities. Now analysts are speculating that the Fed will resume another round of quantitative easing (QE3) to the tune of $500 billion mortgage backed security purchases. The Fed reported yesterday that it will pay $76.9 billion to the U.S. Treasury as part of an annual dividend.

Another issue that is preventing the Fed from being successful despite pushing mortgage rates at record lows is the stricter requirements to qualify for mortgages. Borrowers without perfect credit history are being locked out by banks and lenders.

Wall Street was mixed today as investors eagerly waited for the Fed’s Beige book report. The report would shed further light on the state of affairs and provide guidance ahead of the next Fed rate announcement scheduled for January 26th. Some agree that the Fed has achieved some measure of success with its policies and more QE would get the U.S. economy out of the doldrums. The Dow is down 38 points, the Nasdaq is up 4 points and the S&P 500 is down 2 points by mid day trading in the U.S. session. Traders on OpenBook are primarily long the Dow (DJ30) with average limits at 12,550 and stops at 12,200.

 

 

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This article appears in: Personal Finance , Real Estate , Economy , US Markets

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