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Daily Market Update 12/17/08

Mortgage rates plummeted Wednesday morning on the heals of yesterday’s FOMC meeting. In addition to dropping the Fed Funds Rate to a target range of 0% to 0.25% (the lowest level ever), the Fed said they will employ “all available tools” to stimulate economic growth, including the purchase of large quantities of mortgage-backed securities (MBS). MBS markets rallied on the news, pushing 30-year fixed rates to their lowest levels in over 40 years. Rates have been extremely volatile and have since risen by about 1/4% due to extraordinary refinancing demand. Such movement is fairly common after a significant improvement and rates may settle back down in the coming days.

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