by Laura Conaway

One last question for now, this one from Twitter friend @marilynm:

I've heard w/the takeovers interest rates may go down. Why? Lower rates but homeowners get lower appraisals. Only first time buyers benefit?

Still feeling fresh, Adam Davidson replied:

 

"I would say that the reason interest rates will go down is as follows:

"Interest rates go up when things are more risky. You know, a really risky company has to pay more to get people to lend them money than a safe company — just like risky people pay a higher interest rate for their credit card debt. Until Sunday, there was a tiny, niggling doubt that maybe, just maybe, the U.S. wouldn't come in and bail out Fannie Mae and Freddie Mac debt. So their interest rates were a tiny bit higher than other U.S. government bonds. Now, though, we know that the U.S. will step in to help Fannie and Freddie. We know this because the U.S. did step in. Yesterday.

"That means there is less risk of a collapse of Fannie and Freddie debt. So the interest rate falls — just like your credit card interest rate falls if you get a higher paying job.

"When overall interest rates are lower, mortgages tend to have lower interest rates, too. That means more people can get mortgages and more people can buy houses, so housing prices go up.

"That would benefit current home owners. First-time buyers, I would guess, are sort of hurt and sort of helped. They are hurt because home prices are higher, so they have to pay more to buy a house. But they're helped because they can get that costlier house with a cheaper mortgage. "