Mortgage Rates Rise in Response to Wind-Down of Federal Support

2009 saw historically low mortgage rates.  Early last year, the Federal Reserve announced plans to purchase debt and mortgage-backed securities from Fannie Mae and Freddie Mac to lower interest rates for consumers and spur homebuying.  As a result, rates on 30-year, fixed mortgages fell to historic lows.

2010 rates are expected to rise because the Fed’s asset purchase program is scheduled to expire at the end of the first quarter of 2010, and a lack of private demand for mortgage-backed securities could lead to a rise in rates.

“No down payment” loans were very popular during the height of the boom.  For those types of loans, borrowers were not required to put down any money on a house to secure a mortgage.  “No down Payment” loans are now practically nonexistent.  Currently, most lenders require borrowers to put down at least 10 percent, if not more, to secure a loan.  Down payments definitely help protect the lender, but they may also be beneficial to buyers.  For example, the higher the down payment, the lower the loan amount, the lower the monthly payment and the lower the total interest over the life of the loan.

Stakes are high as government plans exit from mortgage markets
The wind-down of federal support for mortgage rates, set to end in two months, is a momentous test of whether the Obama administration and the Federal Reserve have succeeded in jump-starting the housing market and ensuring it can hold its own.

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One thought on “Mortgage Rates Rise in Response to Wind-Down of Federal Support

  1. Lenders are not being shy about offering the most aggressive rates of the year as they need to get as much new business in the door and locked now just in case mortgage rates move higher in the day’s to come. The only loans I recommend floating are those that can be locked on a shorter commitment period in the next few months.

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