Mortgage interest rates have fallen below 6% this week following the news Sunday that the Treasury Department will take over Fannie Mae and Freddie Mac. The rate on a 30 year fixed rate mortgage now stands at around 5.875%
Since the two entities' debt is now backed by the full faith and credit of the U.S., buyers of mortgage backed securities are now willing to accept lower yields, closer to those of treasury bonds which are perceived to be "risk free." This narrower yield spread in turn leads to lower interest rates on home loans.
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