Takeover of Fannie, Freddie Sends Mortgage Rates Sharply Lower

by Alex Stenback on September 8, 2008

Graphic via Mortgage Market Guide

Since the market opened today, Mortgage Bonds have been in a full throated, day long rally.  Should these levels hold through the end of the trading day, we’ll see rates within shouting distance of lows set, very briefly, in January of this year, which were in the 5.5 – 5.625% range for a best-case-scenario 30 year fixed.

The chart above represents the 12 month price history of FNMA 6.0% mortgage backed securities.  Remember, with mortgage bonds, the higher the price, the lower the rate.  The peaks you see represent, roughly, the low point for rates over the last 12 months.

Amazing what a little government intervention will do for mortgage rates.

To the extent that this move was aimed at shoring up investor confidence in mortgage backed securities, it has worked, in a big and almost immediate way, resulting on lower mortgage rates, at least for today.

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