Mortgage interest rates hit their highest point in two years this week.
And that has a lot of people wondering what higher rates would do to the rebounding housing market. ‘If rates increase too much, will that taper demand and cause housing to lead us into another recession?’ goes the thinking.
And rates are rising because the Fed has been mulling over and speaking about ‘tapering’ the buying of both Treasuries and Mortgage Backed Securities (MBS), through the Quantitative Easing buying program. Essentially, the Fed has been subsidizing mortgage rates to help the housing market to find solid footing again.
Well, a couple of credible sources recently have advocated for the Fed to taper the buying of Treasuries; but continue or even step up the buying of MBS, so that the housing market continue it’s recovery.
Here is a excerpt from a Fox News story on the topic:
The Federal Reserve should concentrate its unconventional monetary stimulus on mortgage asset purchases, according to a new study released on Friday, ditching Treasury bond buys which the authors say have not had much of an effect.
If this plan were to be implemented, we would certainly see another rally and mortgage rates falling back to the low 4′s on a 30 year fixed rate. Perhaps we could see the 3′s again.
For now, it looks like rates are up a little. But historically still very, very low.
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