Mortgage Bond Mortgage Rates Mess: Mortgage Rates Anybodies Guess in 2010 (VIDEO)
By: Sheldon Levene
As we all know the government has been buying mortgage backed and agency related securities, to the tune of over one trillion dollars. This effort was part of a plan by the government to drive mortgage rates down to 4.5% and free up capital for lenders originating mortgages to continue to do so. So far so good. Overall the program has been a success for the most part avoiding catastrophe in the housing market. While lending has been slow, credit is available for qualified borrowers and new home sales have been fueled by low mortgage rates.
As the government winds down it’s buying of mortgage backed securities, set to end in March, analysts wonder what affect the stoppage will have on mortgage rates. Most economists, including economists from the likes of Wells Fargo, believe mortgage rates will rise and rise significantly. Another perspective is that buyers will enter mortgage bond market once the Fed exits. Another problem occuring now is up to $100 billion in these bonds the government has purchased are not being delivered.
Here’s a video from today from Bloomberg that covers all of this in a minute and a half. Click to play.