US Treasury Department considering 4.5% interest on mortgage loans
(December 5, 2008) -- Treasury Secretary Henry Paulson is reportedly considering offering 4.5% interest on new mortgage loans used for home purchases. The low rates would encourage people to buy homes who may otherwise have sat on the sidelines, watching the real estate market but not buying in. By making homes more affordable through this financing initiative, the Treasury Department hopes to reduce home inventories and help stabilize the real estate market.
As recently as September, Fannie Mae and Freddie Mac fixed-rate mortgages had interest rates as high as 6.375%. With that interest rate, a home buyer's monthly payment of $1,350 could buy a home worth only $179,000. With a 4.500% interest rate, that same monthly payment could buy a home worth $214,000.
Since the US Government is borrowing money these days at rates around 2.700%, the plan would allow the government to borrow funds through sales of US Treasury bonds and use the proceeds to buy loans from Fannie Mae and Freddie Mac, which would offer consumers the 4.500% interest rate.
To see how much home you could qualify
to buy with a 4.500% loan, click
here.