There has been a lot of headlines recently concerning the Feds plan to stop their purchasing of Mortgage Backed Securities in the coming weeks. Why is this important and what does it mean to mortgage rates?
It means everything. The prices derived from the trading of these Mortgage Backed Securities (MBS) are what determine the interest rates that lenders pass on to consumers. The Feds have been buying massive quantities of MBS over the last 18 months in an effort to keep interest rates low and to keep cheap credit money flowing freely. The Feds decision to no longer prop up this MBS market and therefore lessen demand is expected to cause an increase in interest rates of the coming weeks and month. FOr homebuyers this is a crucial time to select the home of your choice before the payment of your desired home rises with the market. Interest rates are going up, for any serious buyers the time is now to get off the fence and grab those rates while they are still available.
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