“Mortgage Rates on Extended Life Support”by Tim Manni
The biggest news involving mortgage rates last week was the Fed’s decision to extend, not expand, the term of their $1.25 trillion MBS purchase program into 2010.
According to the latest issue of HSH’s Market Trend’s Newsletter — ‘Mortgage Rates on Extended Life Support’ — “Anyone who believed that the Federal Reserve would flip a switch and exit the mortgage market at the end of this year was proven wrong this week. The Federal Reserve extended the term of its $1.25 trillion MBS purchase program at least until March 31, 2010. Approximately two-thirds of that money has already been spent, and with the rest now being slated to be spread over a longer period of time, it necessarily means that the Fed’s influence over conforming mortgage rates will wane somewhat.”
“The overall average for 30-year FRMs moved just a lone basis point this week. HSH’s FRMI closed Friday with five-day average of 5.49%. The FRMI’s 5/1 Hybrid ARM counterpart shed two basis points, landing a 4.82%. Thirty-year FRM jumbos nudged closed to the 6% mark, a level last breached in September 2005.”
“Other support programs for rates have differing expiration dates, and may inject their own influences into the mortgage and real estate markets. The Fed’s program for purchasing $300 billion of Treasury debt has only about four more weeks to run, and the lack of a Federal Reserve to act as a sponge during times of oversupply could boost underlying interest rates which would in turn goose mortgage rates. The program for Fannie and Freddie to purchase certain “high-balance” conforming loans may or may not be extended past the end of the year, and to some degree could pressure the jumbo mortgage market. We should note that the $8,000 “first time” homebuyer tax credit will expire in November, and the end of that program may cause some falloff in home sales.”
Click here to continue reading “Mortgage Rates on Extended Life Support.” HSH’s free weekly Market Trends Newsletter, an in-depth analysis of various financial markets of the week prior, is published every Monday. Email subscribers receive it in your inbox by Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.