The Federal Reserve is going to stop buying mortgage backed securities on March 31st, effectively stepping aside to let private investors start buying them again. Since the Fed started buying MBSs about 18 months ago mortgage rates have been incredibly low, around 5%. This has helped keep the real estate market moving, and let people refinance at more affordable rates than they might have been locked into. Once the Fed steps back, rates will rise. Experts are expecting them to go up to anywhere between 5.7% and 6.5%. While not has high as the market has seen before (15%!) this might slow down the market a bit. But, if rates continue to rise without slowing down, don't expect the Fed to stay out of it! They will step back in if rates go too high, in the long run they want the core financial industry of real estate to get healthy again, only then will consumer confidence really be back.
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