Mortgage Interest Rates Drop
Mortgage interest rates dropped based on news that the Federal Reserve has bought a total of $217 billion in securities that were mortgage backed, according to market researcher Wrightson ICAP . The Federal Reserve in New York jumped into that market and started buying debt sold off by the big mortgage finance companies that included Fannie Mae, in January.
The Federal Reserve in New York jumped into that market and started buying debt sold off by the big mortgage finance companies that included Fannie Mae, in January. It also started buying the mortgage-backed securities bundled by the agencies.
Both steps positioned the Fed as buyer in secondary mortgage markets that had seized up but are vital to enabling lenders to make new home loans. Mortgage lenders sell many of their loans to institutional investors, and higher rates charged by these investors to hold pooled bad credit mortgages make it harder for originators to offer lower rates on new mortgage loans. Conventional and FHA mortgage rates were both slightly lower than the previous week.
In a sign that the purchases are driving down rates and encouraging private investors to also step in, the gap’s dropped in just a few months between Treasuries and the interest rates that the agencies and mortgage-backed securities have to carry to make them attractive. Yields on mortgage-backed debt dropped to 0.87 of a percentage point more than Treasuries, down from 1.90 points in December, and are near the lowest seen since late in 2007, according to a Merrill Lynch index. Request mortgage rate updates for home financing with Fannie Mae, Freddie Mac and FHA interest rate updates online.
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