About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
Filed under Government Mortgage Financing Programs News

The Fed has been buying billions of dollars of mortgage backed securities in the last years or so, fueling the huge drop in mortgage interest rated we saw in 2009. Well the plan is to cut that program off in March and that is fueling fears that rates will be skyrocketing soon. We get this from a recent WSJ article:

The Federal Reserve’s pledge to stop buying mortgages by the end of March is sparking fears among home builders, mortgage investors and even some Fed officials that mortgage rates could rise and knock the fragile housing recovery off course.

The recent rise in mortgage rates could be a prelude to even bigger increases in coming months as the Fed steps away from support for the market. That prospect has some in the markets counting on the Fed to change course and keep buying past March, which many officials are reluctant to do.

When such a big investor stops buying, “that could lead to material increases in [interest] rates across the board,” said Ronald Temple, portfolio manager at Lazard Asset Management. He sees mortgage rates rising by a percentage point when the Fed stops buying. A withdrawal of government support, combined with high unemployment and rising mortgage foreclosures, could push home prices down 20%, he said.

Comments (0) Posted by G.R.A. Admin on Friday, January 8th, 2010


You can follow any responses to this entry through the magic of "RSS 2.0" and leave a trackback from your own site.

Post A Comment