Lower 30 Year Fixed Rates
If the Treasury Department follows through on expectations to buy additional mortgage backed securities from Fannie and Freddie, analysts are expecting mortgage rates to drop a full percentage point. This would mean that the interest rate for a 30 year fixed mortgage could near the 4.5 percent levels - a possibility that would certainly increase mortgage loan activity.

The anticipation is based on the idea that the Treasury is hoping to restore confidence back in mortgage backed securities, which would lead to the plunge in mortgage interest rates. As banks would feel more confident in making more loans, more consumers would also reap the benefits of the government’s help. If you’ve been following the recent $700 billion government bailout, you’ll understand why so many consumers have been outraged that most of the help has been directed to the financial companies.

California Homes and Jumbo Financing
For residents and potential homeowners in California, one thing to remember is that not everyone will be able to reap the benefits. Due to Fannie and Freddie’s loan limits, the two numbers to keep in mind are $417,000 and $625,500. These will be the conforming and jumbo loan limit restrictions during 2009 respectively. Currently, the max loan limit may still be $729,750 for some lenders, but that will soon expire on December 31^st. These loan limits determine whether or not your mortgage can be guaranteed by Fannie and Freddie. For those above the limits, it may be harder to find financing at such discounted mortgage rates.

A Word of Caution
I know 4.5 percent mortgage rates will be enticing, but it’s also important to make sure you don’t get overexcited. While the rate and payment savings would be hard to ignore, a significant problem that we are seeing today are people stuck with homes that couldn’t afford in the first place. 

In general however, lower mortgage rates will be a welcomed change as it would help stir up activity in our slumping housing economy.  The decision is expected to come out soon, and many homeowners and potential buyers have already held back on their housing decisions. The change won’t cure market overnights, but it will bring more of the government “bailout” directly to Main Street - a move that’s been long awaited by anxious consumers.

If you need more information regarding some of these interest rate changes, try out our mortgage broker directory to find an agent in your area.

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