US housing market is also one of those reasons, which served the sudden downfall of the nation’s economy. The housing market bubble is now in a phase of downturn and seems to continue in wailing numbers for some more time.
Though the problem is not instantly resolvable, the Fed has started its plans to resurrect the market. The initial step in this process is to buy long-term government bonds and additional mortgage-backed securities. It is estimated to cost the Fed around $1 trillions.
This plan is also helping the economy in other way. As the government is expected to buy $750 billion in additional mortgage-backed securities, the mortgage rates are likely to decline. The decline is not going to be an ordinary one. As analysts say, the mortgage rates are likely to fall 0.25 to 0.5 percentage points.
Though, Fed is encouraging so much, the mortgage lenders are still restricting the availability of loans to people without a good credit and at lest 20 percent of down payments. It is discouraging many first-time borrowers from taking mortgage loans.