I mentioned a few times in my newsletter that the Fed will stop buying mortgage backed Securities (MBS) after their last committed buying in March.
The Fed is right now the biggest investor in this market and this is the main reason that the mortgage rates are kept low. The big question is what the mortgage rate will look like after the Fed pulling back on buying MBS and how high the rate will go without the Fed support. Will private capital comes in to support this market?
In the National Association of Mortgage Broker conference held earlier this week in Washington D.C., the FHA Commissioner David Stevens shed lights on this issue.
The Commissioner said it will be the first test of just how sick the market actually is. If private capital comes in, it is obviously a good sign. If prices rose by .25 to .375, it would indicate some market viability and would be tolerable in his mind. More than that and the government would need to step back in which he said it would. “We need to instill confidence in global investors. Cleaning up our industry, and demonstrating quality is how we do that.”
So be prepared for a rise in interest rate by 0.25 to 0.375. On the positive side, even with this rise, the 30 year fixed rate should still be around 5.5% level, which remains a good rate historically speaking.
If you want to lock in a lower rate before it goes up, call me immediately.
