They say March comes in like a Lion and out like a Lamb. . . But this year, the exact reverse is true when it comes to home
loan rates - for quite a few reasons, including the end of the Federal Reserve
acting as a large buyer of Mortgage Backed Securities (MBS). The
"demand" created by their fifteen-month program has helped Bond
prices stay high and home loan rates stay low.
But the Fed's MBS purchase program will end on March 31st. The Fed
has confirmed this several times, including during last week's testimony by Fed
Chairman Ben Bernanke. What's more, the Fed will likely change sides entirely,
and actually become a seller of MBS, since their balance sheet hangs heavy with
MBS holdings. However, once the Fed begins selling MBS and puts more supply
into the market - at the same time as entirely removing their past demand as
buyers - this will pressure Bond prices lower and push home loan rates higher.
Read the entire article and short term forecast for mortgage interest rates.
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