The central bank said it plans to extend its program of buying government-backed mortgage bonds, which should have the effect of reducing mortgage rates.

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But when price trends for cheaper and more expensive houses diverge, the effect of the mortgage lenders' method is to give the same weight to each type of property.

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Yet that is the effect of the home mortgage interest deduction, because the same tax deduction is more valuable the higher your tax bracket is.

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Earlier this week, the Council of Mortgage Lenders said the main effect of FLS so far was to make fixed-rate mortgage deals, which account for about two-thirds of all new mortgage borrowing, a bit cheaper than before.

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However, these branches deliver just 9% of Lloyds' profit - largely because what's being sold is in effect a low-margin mortgage bank, without the benefit of all the other higher margin loans and products that Lloyds also sells its millions of customers.

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Ms. CHU: The credit card market is just a fraction of the mortgage market, so the effect is not going to be as big.

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The provision wouldn't have a significant effect on mortgage demand because rates are at their lowest levels in decades, said Guy Cecala, publisher of Inside Mortgage Finance.

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In particular, the impact of the credit crunch, by restricting the availability of mortgage finance, is having a negative effect on demand in both Europe and America.

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So far the government's takeover of the troubled mortgage company Fannie Mae has had the intended effect, boosting confidence in the mortgage market.

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The only discernable positive effect of the scheme so far has been a slight increase in the number of mortgage deals available, but only to borrowers with large deposits to put down, analysts say.

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In effect, Mr Paulson engineered the equivalent of a half-point cut in interest rates targeted at the mortgage market.

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They are in effect saying that the banks are wrong to have become more prudent mortgage lenders since the great financial crash of 2007-8.

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The Fed adds Treasuries and Agency mortgage-backed securities to its assets and pays, in effect, by crediting the reserve accounts of the banking system.

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