Some time ago, I was a student in an advanced capital markets finance class in college. I seem to have forgotten many of the things I learned in that class (or at least “learned” enough to pass the test!) but one thing has stuck with me through the years.
“Don’t fight the trend. The trend is your friend.”
Today, it was announced that the Federal Reserve was committing $800 billion to hopefully unfreeze the capital markets. The announcement came as a surprise and stated that the Federal Reserve will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae.
“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.
This $800 billion is in addition to the $700 billion “bailout” that was announced by the Treasury in early October.
Look for interest rates to generally trend lower in the relatively near future. And no, I am not 100% certain of what exactly the future holds — but I *did* learn in class once that the trend is your friend!
Arizona Mortgage Rates For November 25, 2008
