The Fed plans to stop buying mortgage-backed securities the end of March.
The general consensus among mortgage brokers is rates will have to rise to attract new buyers of MBS if the Fed does stop buying. After reaching a low last November, the rate for 30-year fixed mortgages has already risen .25%-.375% in anticipation.
The only MBS that are being sold right now are those that are backed by Fannie Mae and Freddie Mac because they are backed by the U. S. government, at least for loans up to $729,000 in our area.
The question becomes, who is going to buy MBS and at what price?
With money market and treasuries yielding between 1%-2%, MBS are looking much more attractive to Wall Street, private investors and foreign governments.
But, at some point, the Fed will have to start selling their MBS which will drive prices down and yields up.
Local mortgage brokers expect rates to rise one-half point fairly quickly after the Fed stops buying. Many think mortgage rates will hit 6% by the end of the year.
That said, the biggest problem facing the local market right now is lack of quality inventory: quality meaning priced right and in the best neighborhoods.
;)
;)
;)
