Yesterday, since it couldn’t lower interest rates any more, the Federal Reserve announced a plan to buy long-term U.S. Treasuries. Because mortgage rates are connected to long-term U.S. bonds, they are down. Indeed, today they dropped below 5% for a 30-year fixed loan.

The efforts by the Federal Reserve are part of an effort at quantitative easing. The idea is to ease monetary policy to a point that banks feel comfortable lending to each other. The thought is that once these banks are comfortable with lending to each other, and the money starts flowing, they’ll start lending to the rest of us. When this happens, the credit crunch comes to an end and the economy starts to recover.

At any rate, the announcement by the Fed has been suspected for quite some time, and it really isn’t much of a surprise that this measure has been introduced.

Learn a little big more about quantitative easing:

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