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How About 4.5 Percent?

Our Readers Who Comment are all over the map this morning in their reactions to the news that the Treasury Department is considering direct intervention in the mortgage market with a plan that could result in fixed 4.5 percent rates for traditional, 30-year loans.

As David Cho, Zachary A. Goldfarb and Dina ElBoghdady write, in a story attributed to sources, the Treasury would offer to buy securities that finance newly issued loans for home purchases, but lenders would have to set low rates. The cost of the plan and the funding for it are unclear.

The biggest complaint our readers have is that the plan as described would not be available for refinancing, and readers paying on higher-than 4.5 percent mortgages would like help too. Others worry that the existence of low-rate mortgages will cause sellers to raise prices because they know buyers can get low mortgage rates. Some think this will be good for the economy, some think it will be disastrous.

We'll start with atajr, who wrote, "This is a better plan than rewarding speculators. While I'll admit that the Treasury is only trying to save its butt, this plan is better for those of us who were responsible and waited it out."

But BethesdaMD said, "They better make these subsidized loans available to anyone who wants to refinance as well. Otherwise they are giving away money to people who want to take advantage of the housing market without helping those who had made responsible decisions."

dre0251 added, "One assumes this low rate would be available to all, especially those of us who always have paid on time. How about a rebate to us as well?"

And lordtwang wrote, "Wanting to help the struggling or the soon-to-buy but not those of us who consistently pay at a higher (but not bad) interest rate. I understand why, but it doesn't make me feel warm and fuzzy. Just makes me irritated and ready to vote for non-incumbents."

nanonano1 offered that "Buying because of cheap money is not always the best motivation."

Lavrat2000 said, "Rates should go NO LOWER than the current rates available. I am paying my mortgage on time and I can;t get 4.5 percent -- why should someone who should never have gotten a mortage to begin with get that low rate."

jellyhouse56 sees a sinister plot, writing, "The government and the federal reserve is desperately looking for a way to preserve the status quo and to enslave the american people..."

slim2 said, "The unstated goal is to restore the inflated house prices that existed several years ago. Sorry fellows, it ain't gonna work."

But camasca wrote, "Overall, it's a good idea if they can drive down rates. A couple extra hundred bucks a week is alot of money for people."

wpfree said, "It's just yet another corporate/industry lobbyist plan to prop up the status quo: hyperinflated housing prices in metropolitan areas, lobbyist influence of economic policy, and further enrichment of the wealthy. Some change..."

mkkh69 wrote, "...When rates go down prices go up...there are many condos in my area which are on the market for much over 30% of the assessed value. Why would anyone want to buy a property that over valued?..."

PattiORiley warned that "Federal manipulation of the mortgage market is what poisoned the capital markets to begin with. Since it cannot be maintained indefinitely, the additional Federal manipulation of the mortgage market being proposed only pushes back the day we finally reach bottom and start recovering. It is very short sighted."

Rax359 said, "...I don't see why the government would need to put any money into a program like this. Just make the banker lower the rates for High score loan owners and people with good credit."

wcain1 wrote, "...The lower rates are a PART of improving the demand side of things but the overall demand picture will not improve measurably until the strong downward pressure on prices is relieved or stopped. This can only be achieved by significantly decreasing the number of foreclosures..."

watsond25 said, "The market will only be correct when houses are valued as places to live and raise families, NOT as investment vehicles."

We'll close with Tupac_Goldstein, who suggested that "Government should purchase ALL outstanding mortgages, including mine. Immediate Cash will flow to lenders. Home purchasers will be freed of mortgage payments and thus can pump more cash directly into the nations economy. I owe $102,000. Please send check ASAP."

All comments on this article are here.

By Doug Feaver  |  December 4, 2008; 7:08 AM ET
Categories:  Economy Watch , Mortgages , Treasury  | Tags: Economy Watch, Mortgages, Treasury  
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