Refinance & Interest Rates

How does the government takeover of Fannie Mae and Freddie Mac affect mortgage rates?
Rates for 30-year fixed mortgages fell immediately after the announcement of the takeover. "The 30-year conforming rate dropped from 6.25% to 6% on Monday morning and was down to 5.875% on Tuesday," says Chris Smith, president of Capstone Mortgage in Lexington, Mass. "It's a great time for people to refinance out of an adjustable-rate mortgage into a fixed loan."
New rates for ARMs, however, didn't improve much after the announcement. Rates on these "conforming jumbos" tend to be about .125% higher than they are for standard conforming loans, says Smith.
And the rates continue to be significantly higher for full-fledged jumbo loans — which is anything above $523,000 in Smith's county, or above $729,500 in Sherman's area. "Due to the ongoing credit crisis, there is still no secondary market for jumbo loans," says Smith. Many people with jumbo mortgages are staying put. Deciding whether to refinance a jumbo mortgage is "totally on a case-by-case basis," says Sherman. You generally need a score above 740 to qualify for the best rates and can get good rates with a score of at least 660, says Sherman.