Fed Getting out of the Market
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.
Loading ...Thank you,
Matt Steinmetz
Envoy Mortgage- Voted Top 25 Tech Savvy Lenders by Mortgage Technology Magazine
2151-A2 Salvio St.
Concord, CA 94520
Phone 925-671-9501 x119
Learn When to Pay Points
Information about the $8,000 First Time Buyer Tax Credit
Information about the $10,000 New Home Tax Credit in CA
Apply for a loan online
FHA* VA * CALPERS * CALVET * FHA 203K Rehabilitation Loans * Energy Efficient Mortgages
Tags: california, Concord ca, contra costa, envoy mortgage, foreclosures, matt steinmetz, purchase, rates
3 Comments
Other Links to this Post
RSS feed for comments on this post. TrackBack URI
By Matt, January 4, 2010 @ 2:09 pm
Hello All! I was asked “what does that mean for lenders and real estate?” So I thought I’d add this here:
Higher rates usually means lower sales prices due to purchasing power going down. What I mean is, as rates go up people can afford less. With less purchasing power you have other issues, such as appraisers trying to give value to a house in a market with a downward trend. Value will continue to be an issue.
For lenders, refinance business will decrease as people hope for rates to go down.
By Matt Steinmetz, January 11, 2010 @ 9:57 am
Within a few days of my post above, whispers started hitting the news lines and now even more chatter is available, that the FED is meeting later this month to discuss, among many things, the option of extending the MBS purchase program to keep rates lower longer. As with anything else, DO NOT consider this a truth until it has been done. With that said, it would be good news for rates and you.
By Matt Steinmetz, March 25, 2010 @ 7:54 am
Only 6 days left for the Fed purchase program. Rates already on the rise.