Tuesday, March 16, 2010

Mortgage Interest Rates After March 31 - US Federal Reserve Ending of its Mortgage Backed Securities Purchase Program

The US Federal Reserve in early 2009 started on a $1.25 trillion mortgage-backed securities (MBS) purchase program to help keep mortgage rates low and stimulate the economy.
 
The amount purchased varied from week to week and reached a peak on March 25, 2009The Fed has been gradually reducing the size of its purchases consistent with proposed March 31, 2010, conclusion of this program.
 
Question:  What will happen to mortgage interest rates when the US Fed and its MBS purchase program ends?
 
Estimates for impact on mortgage rates after conclusion of the program vary.  The added demand from the Fed was credited with moving rates lower.  A decrease in demand would typically push rates higher.
 
Some economists say that investors respond only to unexpected news.  If that's true, the Fed has already told us about end of the program, so there should be little if any market reaction after March 31. 
 
The US Fed itself has indicated that they expect a modest increase in mortgage rates due to the end of this program.
 
We are hoping for little or no mortgage market rate increases after March 31.

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Posted via email from Explore OC Homes

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