U.S. 30-yr fixed mortgage rate falls after GSE deal

By Julie Haviv

NEW YORK (Reuters) - Interest rates on 30-year fixed-rate mortgages have plunged due to the U.S. government's rescue effort for mortgage finance companies Fannie Mae and Freddie Mac.

The 30-year fixed-rate mortgage has fallen to near 6.00 percent on Monday from 6.50 percent on Friday, according to Greg McBride, senior financial analyst at Bankrate, Inc, in North Palm Beach, Florida.

"The interest rate drop is without a doubt entirely attributable to the development on Sunday with Fannie Mae and Freddie Mac and the government bailout," he said.

"The question is how much of the interest rate drop will actually stick," he said.

The U.S. government seized control of Fannie Mae and Freddie Mac on Sunday, launching what could be its biggest federal bailout ever, to support the U.S. housing market and ward off more global financial market turbulence.

"There are concerns about how much debt the U.S. will be issuing as a result of this bailout and that could pressure benchmark Treasury yields, offsetting some of the improvement in mortgage spreads," McBride told Reuters.

Treasury yields, which move inversely to price, are linked to mortgage rates.

"It will take a while for the dust to settle, but I would not be surprised to see Treasury yields go up over the next week and that could negate or dilute the decline we have seen since Friday in mortgage rates," he said.

(Editing by James Dalgleish)