Only 12 weeks remaining of the Fed MBS purchasing program. I’ve blogged this before but let’s recap.
The fed planned to spend 1.25 trillion dollars buying mortgage backed securities, which are really just bundles of loans, like yours, that are sold on a secondary market, like stocks and bonds. They have spent over 1 trillion and with only 12 weeks remaining will be winding down this program. Why should you care?
Since the secondary market is like any other and responds to supply and demand, when there is less demand, investors will need to be enticed to buy. How do you do that? With larger returns. In this case returns are created by the interest rates, so you can see that higher rates will be needed. This is of course passed on to the consumer, meaning home loan rates are expected to go up.
If you or anyone you know has been on the fence, to buy or refinance, time is running out. We may or may not see one more dip before the 12 weeks is up, but rest assured that unless the Fed extends the program, rates will go up.
Couple higher rates with foreclosures and short sales, we can expect a slight loss in the (small) gains we saw late last year in housing prices. As rates go up the buyers lose purchasing power and are less likely to buy higher priced homes.
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Thank you,
Matt Steinmetz
Envoy Mortgage- Voted Top 25 Tech Savvy Lenders by Mortgage Technology Magazine
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