This big question on a lot of minds is how much should we expect mortgage interest rates to increase when the Fed discontinues its purchasing of mortgage backed securities at the end of this month. The reality is that nobody knows. If the markets step up the impact could be fairly small, if not, rates could shoot up. Here is an excerpt from a recent MoneyWatch piece on the subject:
The bigger concern for higher rates, however, may be what happens to the market prices for mortgage rates, as the Fed stops supporting the market for mortgage-backed securities (in the course of the various rescues it has bought over a trillion dollars’ worth). Most economists are nonchalant, but they also confess to not really knowing what might happen. …