“Why Mortgage Rates Could Move Down (Modestly)” (David and Stacey Kaufman)February 17, 2010
Submitted by David and Stacey Kaufman, REALTOR®, Atlanta Fine Homes Sotheby’s International Realty
From www.wsj.com (February 12, 2010)
By Nick Timiraos
Mortgage rates fell this past week, and there’s reason to believe that rates could dip a little more in the coming weeks.
Average rates on 30-year fixed-rate mortgages dropped to 4.97% for the week ending Thursday, down from 5.01% last week and 5.16% one year ago, according to Freddie Mac’s weekly rate survey.
Meanwhile, Fannie Mae and Freddie Mac announced on Wednesday that they would begin buying delinquent loans out of pools of mortgage-backed securities owned by investors. Freddie plans to buy up most of some $70 billion in delinquent loans this month, while Fannie, which has a bigger pile of defaulted loans that it has guaranteed, will buy out those loans over the next few months.
That could drive down rates in the short term, say analysts, because investors will sell higher-yield bonds to buy par coupons, which drive mortgage rates. “Overall, you would anticipate that that would lower interest-rate pressure a little,” says Jim Vogel, an analyst at FTN Financial.
Meanwhile, Fannie and Freddie’s buy-out of delinquent loans will kick lots of cash back to investors over the next few months, and many of those investors may look to put that money back into mortgages. That could help support lower mortgage rates, too.
To be sure, this would be a short-term event, and one that dissipates as the market adjusts to the buy-out activity.
Most analysts expect mortgage rates to rise later this spring, when the Federal Reserve stops buying mortgage-backed securities. Those purchases have helped hold rates at near-record lows for much of the past year.
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