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30 Year Mortgage Rate Increase

Fixed 30-year mortgage rates on home loans increased this past week as the Federal Reserve ended its $1.25 trillion mortgage purchasing program. The Fed began purchasing mortgages to provide liquidity to the market at a time when many investors were avoiding mortgages. The Fed’s goal was to keep mortgage rates low and loans available to qualified buyers during the recession.

The Fed announced the plans to end the program back in September 2009, so this news was no surprise. Fixed mortgage rates on 30 year loans climbed this week to 5.21 percent, up from 5.08 percent a week earlier. Mortgage rates reached a low of 4.71 percent last December and have been steadily inching upward since, but had not experienced a surge quite like the one they endured since the Fed program ended. The Fed left the door open to reviving the program if the economy weakens.

Will Interest Rates Increase Significantly?

Private investors will need to fill the void, since the Fed is no longer purchasing the bulk of mortgage backed securities in the market. As long as there is enough demand from private investors, then mortgage rates should remain stable. However, if demand for mortgage back securities does not meet supply then rates will need to rise to entice more investors into buying them. If enough investors are looking to purchase mortgages it is possible rates may come down a little from where they are right now.

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April 9, 2010 - Posted by | Uncategorized | , ,

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