The US Federal Reserve lit a fuse under the Treasury bond and mortgage markets on Wednesday when it announced plans to buy more mortgages and long-term government debt.

The Fed efforts at lowering mortgage rates came after the latest weekly data from the Mortgage Bankers Association showed the cost of 30-year fixed-rate home loans falling to 4.89 per cent, matching the record low set in early January for a survey that has run since 1990.