Interest Rates Drop on News of Fannie and Freddie Takeover

Yesterday, on September 7, the U.S. government announced it was placing Fannie Mae and Freddie Mac -- the financial giants who guarantee the bulk of U.S. mortgage loans -- under government control. Conservatorship it's called. The government will be guaranteeing some $5 Trillion in mortgages  --- loans that were once guaranteed by these two quasi-governmental agencies. 

Early reports of the news had stock analysts wondering how the market would react, but the market rallied strongly on the news and despite the fact that mortgage rates often rise when the stock market rises, mortgage rates dropped significantly. Here in Lexington, KY, a loan officer friend of mine told me rates on a 30-year conventional mortgage had dropped from an average of 6.25% to 5.75% -- a tremendous reduction and the largest one we've seen in a long time. On a $300k loan, that half-point reduction amounts to a savings of $125 a month! 

No one knows, of course, how long this interest rate drop will last -- it could be a one-day drop or it could hang on for a while -- but one thing's for certain -- if you're thinking of buying real estate in Lexington KY, there's no better time than right now. 

 

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