Mortgage Blog

Over the weekend, our federal government seized Fannie Mae and Freddie Mac.  The implications for our industry are encouraging.  When I left work on Friday the average 30 year fixed loan with no points was approximately 6.375%.  This morning, several of my lenders have reduced their rates by almost half a percent, down to 5.875% no points.  This is one of the largest one day decreases in rates that I can remember.  Of course its still early but this is clearly a good sign.

The reason behind this drop is that mortgage investors have been nervous and scared about the financial condition of Fannie Mae and Freddie Mac.  These investors demanded a higher margin or rate of return on their mortgage investments.  This directly affected our mortgage rates, pushing them artificially higher than normal.  Now that the federal government is backing the mortgage giants, investors do not require the same rate of return.  Thus our rates have already fallen sharply in one day.

This development may have a big impact on our housing market.  If interest rates are lower, more people will be able to or want to purchase homes, especially now that home prices have dropped as well.  This could be just what our housing market needs to recover.

We shall see how this plays out,  I will update rates next week hopefully with something good to report.