How GSE Takeover Is Affecting Mortgage Rates

October 17, 2008

As predicted, mortgage interest rates dropped substantially immediately after the highly publicized government takeover of the GSEs - Fannie Mae and Freddie Mac. In late September it started rising again. Not surprisingly, the sudden drop in rates was followed by an increase in mortgage applications, particularly refinance mortgage loan applications.

With still very low mortgage rates and the expectation that they will continue to rise, more prospective buyers are taking action to seek out and purchase a home. The most active groups in the current market are young adults and minorities, according to one study.

"Renewed financial concerns should keep long-term Treasury yields low and translate to lower mortgage rates in the near term despite some widening in mortgage spreads," said Orawin Velz, a vice president of the Mortgage Bankers Association. "We expect to see meaningful increases in mortgage demand in coming weeks on both the purchase and refinance sides."

Posted in Lending, Real Estate