CNN is reporting that Lobbyists are pushing the Treasury Department to buy down interest rates. Cnn’s says “Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac.” That proposal caused an immediate drop in rates of at least ½ point.
What will this mean to you as a home buyer? Well I did a little math and the numbers are impressive. If you were to buy a home last month when interest rates at some lending intuitions hovered around 6.5% your monthly mortgage (minus homeowners insurance and down payment) would be approximately $1,514.14 a month. If you bought a home today and locked in a mortgage of 5.75 your payment would be approximately $1,417.15 monthly. But buy a 200,000 home or refinance a mortgage at 4.5% and your payment drops to $1,263.37 a month. That’s a $250 a month savings!
In any case it’s a great idea and if current homeowners can save money on mortgages it could help pump money back into the economy.