Rate Watch
Mortgage rates fall, after Government takeover of Fannie Mae and Freddie Mac
Forget last week’s economic calendar, it is now irrelevant. On Saturday, the Treasury Department announced that it would be taking over Fannie Mae and Freddie Mac. This is gigantic news for the mortgage markets, as Fannie and Freddie are the largest mortgage makers in the US. To be more precise, they are the mortgage market in the US. With this take-over, mortgage backed securities are now explicitly backed by the Federal Government. Since the US has the best credit rating in the world, this is going to really help to push interest rates down considerably.
As of this morning, Bankrate.com’s overnight average on the 30-year fixed rate mortgage is down to 6.08%, down from last Monday’s 6.26%. Other products followed. The 15-year fixed rate mortgage fell to 5.62%, down from 5.77%. And the 5-year Adjustable Rate mortgage fell to 5.78%, down from last week’s 5.92%.
The Fannie/Freddie news will probably have an impact for the rest of the week. Mortgage rates will more than likely continue to fall, as the market searches for a bottom. After the market finds a bottom, economic data might start having an impact. On Friday, there are 2 reports to watch, the Producer Price Index (PPI) and the Retail Sales report. PPI measures wholesale inflation in the US. Investors will be looking to see if falling oil prices have helped to moderate inflation. Although PPI is not as impactful as the Consumer Price Index (CPI), this will be a good predictor of next week’s CPI report. The Retail Sales report measures the performance of the nation’s cash registers. Since consumer’s make up two-thirds of economic activity, this report is an important indicator of economic health.
Mortgage rates will probably remain volatile through the week. It probably won’t take the market any longer than a couple days to find a bottom. After that, borrowers should look to lock in their rates and take advantage of these lower rates.
posted by Vincent Biondillo @ 5:10 PM
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