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September 2009
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Will Mortgage Rates Remain Low in 2010?

The Fed’s Federal Open Market Committee announced that they were leaving mortgage rates unchanged.  However, what wasn’t reported by main stream news organizations is the real story. According to the statement released by the Federal Reserve, in an effort to “provide support to mortgage loan and housing markets” they will “purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.”  Additionally, “they expect to gradually slow the pace of these purchases in order to promote a smooth transition. So just what does this mean for mortgage interest rates?  “In short - They are going to go up.  It’s simple supply and demand,” says Scott Messina, publisher of Mortgage Market Live.  “Just how fast remains to be seen, it really all depends on how fast the Fed turns off the spigot.”

2009 began with low mortgage rates in an effort to stimulate housing and the economy at large, the Federal Reserve began buying bad credit mortgage debt.  Without this “help” from the Fed, mortgage rates would have been forced higher to attract more investors.  Instead the Fed has been quietly buying this oversupply to keep interest rates artificially low. “The problem of course, is once this helping hand is pulled back, rates have nowhere to go but up.” added Messina.  “The saving grace is that mortgage rates will likely be very volatile for the next several months. Originators should always remember that volatility can equal opportunity.” “If you’ve watched mortgage rates over the last several weeks, there has been at least one day each week that was preferable for rates. Loan officers that knew which day to lock in their customers loans have saved their customers, on average over a quarter of a percent in rate.”