Mortgage Rates in the 5%’s?

That’s right!  Thanks to the Treasury coming in to bail out and take over Fannie Mae and Freddie Mac, 30-year fixed mortgage rates dropped from the 6%’s to the mid 5%’s on Monday, and have now held there all week.  Earlier this year rates dropped even lower than this but weren’t able to hold on.  Will they stay this low for a pronlonged period of time?  Maybe. . . let’s look at the reasons for the drops.

When the governement came in and backed up the mortgage securities of Fannie Mae and Freddie Mac, it made those securities look more apetizing to Wall Street investors.  They started scooping them up, causing demand to increase, thus yields rose and prices dropped.  Now some say that just like our domestic investors are now finding these investments more attractive, so will foreign investors.  These foreign investors take longer to jump in, so if and when they do, the demand could continue to go up, causing prices to drop again and mortgage rates to follow suit.

Let’s hope this scenario plays out.  It is just what the nation’s slumping housing market needs.  Of course, our market here in Eastern Idaho is still strong, but we will also take any bump we can get.