Are Mortgage Rates On the Rise?
The Fed has been buying mortgage-backed securities since late 2008. But by March 31st it plans to finish its purchase of $1.25 trillion in mortgages, and that could be bad news for our economy.
There is wide agreement that the removal of this support will mean higher mortgage rates, which could hit housing prices and sales harder than we have seen.
Some even worry that it could cause the broader economic recovery to stall.
The program was the largest single injection of cash into the economy by the Fed during the financial crisis which many said helped cease plummeting house values.
And since they have no plans on selling these mortgages, even if the Fed holds onto the mortgages it has already purchased, the act of no longer buying additional mortgages is likely to raise mortgage rates by one-half to a full percentage point in the coming weeks.