Fed in £346bn move to kick-start housing

The US Federal Reserve has set a goal of buying $500 billion (£346 billion) in mortgage-backed securities by mid-2009 in a bid to bring down mortgage costs and restart the collapsing housing market.

Ratings agency Standard & Poor's says prices of homes plunged a record 18% in October from a year earlier, the fastest monthly pace since March.

The scale and aggressive pursuit of the Fed policy surprised some analysts.

"When they are buying along the lines of $80 billion to $100 billion a month, if they're going to do it in six months, they have to buy everything they can get their hands on," said Kevin Cavin at FTN Financial in Chicago.

"It will push up prices and tighten spreads and push down primary mortgage rates."

The Fed has selected investment managers BlackRock, Goldman Sachs Asset Management, Pimco, and Wellington Management to implement the programme.

It cut benchmark US interest rates to almost zero earlier this month.