Great article at CNNMoney.com that explains how borrowers may benefit from the governments takeover of Fannie Mae and Freddie Mac. Under the rescue plan, many experts predict interest rates are headed lower. As far as people with less than perfect credit, I don't see things changing anytime soon. Banks have taken such a beating over the past year that they will continue to be cautious about who they lend money to. Follow the story below:
Sunday's federal takeover of Fannie Mae and Freddie Mac will likely translate into lower mortgage rates and greater availability of credit, experts said. Rates could drop by 1 percentage point from the stubbornly-high 6.39% for a 30-year fixed rate mortgage.
Mortgage rates borrowers pay are dependent on the yields that investors demand when buying mortgage-backed securities from Fannie and Freddie. Investors' doubts about the companies' viability have sent interest rates on those securities soaring. Despite regulators' July promise that they would step in to save the mortgage companies, investors are still demanding rates of 2.25% to 2.45% above Treasuries, LaMalfa said. Historically, the spread has been 1.25%.
Today interest rates dropped to 6%. Whether it's a 1 day reaction to the news or the start of a trend, we'll have to wait and see.