Mortgage rates expected to fall

Real Estate Agent with Estate And Homes Realty


Mortgage rates are expected to fall because the Treasury Department will buy mortgage-backed securities. Here's why rates would fall as a result of the Treasury buying mortgage-backed securities:

When investors buy bonds, they have a wealth of choices. They can buy U.S. Treasury bills and notes, or corporate debt, or bonds from state and local governments. Or they can buy mortgage-backed securities, which behave much like bonds. Mortgage-backed securities are known as MBS in industry shorthand.

Fannie and Freddie guarantee the mortgage-backed securities that they issue, and those securities are deemed quite safe as investments. Not as safe as Treasury notes, but relatively safe. Fannie and Freddie are government-sponsored enterprises, or GSEs, and for decades they had implicit government backing. That backing is now explicit.

  There are still buyers out there, but they have their pick and then some. Others are content to wait on the sidelines to see just how low prices can go. Buyers hold all the cards -- and most of the chips -- and are watching the other players at the table perspire profusely. It's all too easy to see through that old seller's bluff that "there are multiple bidders pursuing this deal, you know."


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