Today's low mortgage rates have dependent on Federal Reserve's buying of the Mortgage-backed Securities (MBS). As the program winds down at the end of this month many wonder how high the home loan rates will go up. One heavy-weight analyst thinks it depends on the Fed. Current mortgage rates may not increase much if the Fed doesn't make a big deal out of it.
Goldman Sachs analyst Sven Jari Stehn says the rate hike may be muted if the Fed acts quietly. He points out to the fact that more noise and market sensitiveness has been around the Fed's announcements on mortgages than the actual purchases of the Mortgage-backed Securities that followed up.
Thus, as published in the WSJ, Stehn says that Goldman Sachs' analysis "points to a modest rise in mortgage rates of around 10 [basis points] when the Fed stops buying MBS in a few weeks." They expect the nominal mortgage rates to remain low and modest because of the "subdued outlook for MBS origination volumes in a weak housing market environment."
However, Mr. Stehn suggests not to have a full confidence on the analysis because of the "unparalleled" swings int he markets. He writes that it is very difficult to confidently estimate the impact of the policy of purchasing and ending the purchase of the MBS because of the above mentioned reason of big swings in the mortgage and broader asset markets.
Written by Armen Hareyan
HULIQ.com
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