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Fed Knows: Mortgage Rates Mean Little to Housing Today
CNBC.com | August 10, 2010 | 04:22 PM EDT

Are you kidding?

What do you mean mortgage rates mean nothing to housing?

Well, we've been sitting around record lows on the 30-year fixed for many many months now, and while the refinance market has certainly seen a boost, the home purchase market has not.

A full 78 percent of residential mortgage applications today are for refis, not purchases. Would things be worse if rates were higher? Of course. I'm just saying they wouldn't be much better if rates dropped another 40 or even 50 basis points.

Today the Fed Funds rate remained unchanged, which doesn't tie directly to the 30-year fixed, but in the additional comments, Fed governors said they would put proceeds from maturing mortgage bonds into treasury debt.

So much for an exit strategy.

"To help support the economic recovery in a context of price stability, the committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities," the Fed said in a statement.

The Vanguard Group's Ken Volpert said he reads in that: "Mortgage rates are low and being lower is not going to make a difference."

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