Mortgage Rates are Lower with the Takeover Of Freddie And Fannie.
by: RobKosberg |
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When comparing two investments with equal risk, a rational person will choose the investment with a higher rate of return.This behavior is called Risk Aversion and is a basic tenet of personal investing.
If the investment with greater risk will yield greater returns, an individual may choose greater risk as part of the Risk Aversion process.
The difference in investment return rates is sometimes called a "spread" and the historical spread between government debt and mortgage debt is somewhere near 1.5 percent.
In July, 2007 we began to hear about the increasing number of mortgage delinquencies and the now well known Credit Crunch. This occurred when the "spread" grew and mortgage investment was a higher risk.
Through the following year, the spread almost doubled. The federal government announced the takeover of Fannie Mae and Freddie Mac on September 7, 2008. After this announcement, the spread decreased since now there was "risk-free" guarantee for mortgage debt.
On September 8, 2008 the mortgage rates began to fall. This occurred because the government is backing the market and the risk that raised rates will not be a factor. For the near future, rates should stay low.
If a person now qualifies for a mortgage loan, he might find an easier loan process. It does not mean that more people qualify for mortgages.
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About the Author
If you are in the market to Buy a Home then check out Rob Kosbergs' Detailed FREE Report on Buying your Dream Home with a Zero Down Mortgage or for up to date Mortgage info visit my Mortgage Blog
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