Most Wall Street participants agreed that the mortgage market had responded very well last week to the Federal Reserve's decision to increase both the federal funds interest rate and the discount interest rate, and many agreed that the past several weeks have signaled a critical turning point for mortgages - one which may ultimately lead to a slightly better outlook in the long-run.

"The reason for the favorable response to the FOMC is that it gives participants assurance that the Fed is proactively mitigating the prospects of higher inflation," said Michael Youngblood, managing director of real estate at Banc of America Securities. "And the confidence that the market has in chairman Greenspan and the FOMC will lead to the expectations over time of lower and more stable interest rates."

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