The Federal Reserve has been buying fixed rate mortgage backed securtities for over a year now and the program expires this week. This program has kept interest rates at historic lows hovering around 5% for a 30 year fixed rate residential mortgage. A mortgage backed security is a package of many mortgages grouped together that is sold to a large financial institution and domestic or foreign governments.
From what I’ve read, it sounds like the Federal Reserve does not plan to extend the program at this time, but you know they will be watching closely to monitor the situation. They/We (It’s the government) have a lot invested.
Many analysts are speculating that this will mean that there will be an increase in interest rates in the months to come, but again, it would seem like the Federal Reserve would do everything they can to keep rates low in order to continue this economic recovery.
Kevin
