Real Estate Finance Alerts

30 Year Conforming Rates Down 0.5% Monday

The market liked the FED decision to takeover Fannie Mae and Freddie Mac.

Depending on your loan and credit, a 30 year fixed is now down to 5.250% paying a point.

We are now very close to many of your refinance Target Rates. I will watch these for you and contact you if rates continue to improve. If you do not know your Target Rate, call or email me and we can quickly determine your Target Rate so you are ready if rates continue to move lower.

Why Did Rates Go Down?

The FED takeover of Fannie Mae and Freddie Mac reduced the risk to investors who buy their mortgages.

Will Rates Go Down Further?

Probably. The difference between the yield on U.S. Treasuries and any other security is a measure of risk; the more risk, the more investors want in return on their investment and the greater the difference.

In March, the spread between U.S. Treasuries and Fannie and Freddie securities was as high as 1%. Just a few weeks ago, it was as high as 0.86%. Today it is down to 0.50%. The change reflects the reduced risk now that the U.S. Government is backing these companies and their debt. Mortgage rates immediately dropped 0.25% this morning compared to Friday.

Through the day, the rates on U.S. Treasuries dropped 0.25%. Mortgage rates tend to follow those. The result is that rates are now lower by 0.5% from where they were Friday.

How Much Further Will Rates Go Down?

In the coming weeks as the final takeover plan takes shape reducing risk further, the spread should shrink further and reducing loan rates compared to the U.S. Treasuries.

The strengthening dollar and the reduced risk for Fannie and Freddie securities should cause foreign investment to flow into the U.S. markets and lower interest rates further. The combination of these two factors could gets rates down close to their 5 year low from 1/19/08 where they touched 5.25% for an hour.

Todd Huettner
303-758-7402
todd@toddhuettner.com
www.toddhuettner.com