A little backdrop to this post. Fannie & Freddie got into financial trouble HERE. They are bailed out HERE. As you may recall Fannie Mae & Freddie Mac, two critical players in the US mortgage market, are currently owned by the Federal Government and are technically in conservatorship. The US government has sunk almost $150 billion into the two companies since they took them over back in 2008 and many politicians are calling for the bleeding to stop. Earlier in the week officials met to begin the debate on the future of Fannie & Freddie. Click this link to read more about the meeting.
Part of the reason rates are so low now is because investors believe that the mortgage-backed bonds are guaranteed by the strength of the US government. Therefore, from a practical standpoint less government involvement would ultimately lead to higher mortgage rates. However, conservatives will argue that low mortgage rates is not worth $150 billion every couple years. They have a point….