Interest Rates in the Post Fed-Purchase World
Many experts believe that 30 year mortgage rates will rise quickly and dramatically once the Fed ends their policy of purchasing mortgage-backed-securities at the end of this month. However, as we get closer to the Fed’s exit there seems to be debate as to how much of an impact it will have.
On one side of the debate are industry players like Guy Cecala, publisher of Inside Mortgage Finance, who said in an article in the San Francisco Chronicle:
“There is no question rates have been kept artificially low by the Fed’s heavy buying. My opinion is that rates will go up a full percentage point initially, meaning that 30-year fixed conforming loans, now hovering around 5 percent, would hit 6 percent.”
This group is basing their projections on the fact that the Fed had originated a huge percentage of the mortgages over the last two years as evidenced by the graph below:
