Mortgage rate drop is possible
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The bond market has been sending better news to mortgage borrowers the last few days, as investors in securities carved out of home loans have been accepting lower returns.
Yields on Freddie Mac and Fannie Mae mortgage securities fell Monday for the third straight day, meaning that buyers are OK with lower rates on the loans backing the securities. The typical rate on a fixed-rate 30-year loan rose to 5.59% last week, up from a record low of 4.78% in late April, according to Freddie Mac.
Yields on Fannie Mae 30-year fixed-rate mortgage bonds dropped to 4.71%, down from 5.07% last Wednesday and the lowest since June 3. Freddie Mac bonds were yielding 4.78%, down from 5.15% on Wednesday. On May 20, bond buyers accepted returns of less than 4% on the securities.
Rising rates have throttled the home refinancing spree that took hold last fall. The recent increase also made it tougher to qualify for home purchases, and higher rates generally can put the brakes on the economy.
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