Thursday, January 28, 2010

Fed to stay the course in mortgage buyback plans

Yesterday the Federal Reserve Board, reiterated its plans to discontinue its program to purchase huge quantities of mortgage backed securities. For the past several months the Fed has kept mortgage rates artifically low by buying large quanities of these instruments. At the end of March, they will discontinue the program. This will allow mortgage rates to be set by normal market processes.

What does this mean? Well, that is the big question. It may not mean a whole lot given that they have already begun to ramp down the purchases, very slowly over the past several weeks. But when the purchases stop, we will see the real impact that they have had. It is a given that rates will go up, but with overall interest rates so low, mortgage rates may not climb much until the economy picks up - and that may be several months away. Time will tell..........

No comments:

Post a Comment