Mortgage Rates To Rise As Fed Ends MBS Purchase

Mortgage Rates To Rise As Fed Ends MBS Purchase

Interest rates on home mortgages set to climb when the Federal Reserve ends its purchases of mortgage bonds, analysts said. The U.S. central bank indicated that it might end the program, through which it bought $1.25 trillion in mortgage bonds, as soon as March. Analysts said the purchases have kept the spread above benchmark interest rates for mortgage bonds much narrower than what private investors would accept. The Fed's withdrawal is expected to push mortgage rates up nearly 0.75 percentage points by the end of 2010.
Excerpted from CFA Institute's Financial Brief.