Mortgage rates should benefit from Bernanke’s comments
On Friday Fed Chairman Ben Bernanke announced that he endorses the concept of the federal government guarantying mortgage-backed securities (MBS’s) issued by Fannie Mae and Freddie Mac. These comments should help mortgage rates move lower.
The reason that a government guarantee helps mortgage rates move lower is because it reduces the risk of default on MBS’s for investors and therefore they are willing to accept a lower yield.
To learn more click these links-
Blog posting on the role that Fannie & Freddie play in mortgage market