Many economists and the housing industry are waiting to see the direction home mortgage rates will go after the nation's Federal Reserve completes its purchasing of Mortgage-backed Securities at the end of this month. There are two opposing views. Both are valid, but we think it will depend on how much noise the Fed will make out of it.
Several months ago the Federal Reserve announced that it will buy $1.25 trillion worth of mortgage-backed securities to help to keep the home mortgage rates lower. The plan was to help the slowly recovering housing market. It has largely worked, but at the end of this month Fed will wind it down.
Many worry that the mortgage rates will start going up as there won't be this support to keep them home loan rates lower.
The first group of economists say the rates will go up. They say there will be a change in the fundamental supply and demand.
The second group of housing economists argue the opposite. They say say investors respond only to the unexpected news. As this will not be news when Fed winds down the mortgage-backed securities, this group of analysts say the investor response may not be that strong.
The Federal Reserve itself has indicated that there may be a modest increase in the mortgage rates. However, it seems that many things may depend on how quietly the Fed will complete the program. If there is not much noise around it, things may continue just as normal.
Disclaimer: This story is for information purpose only.
Written by Armen Hareyan
HULIQ.com
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