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The Federal Reserve's purchases of Mortgage Backed Securities (MBS) peaked at an average of $250-billion per week last May - and they are getting closer every day to being done spending their allotment of $1.25-trillion. Since they announced that their remaining purchases would be rationed out until the end of March 2010 - but not making any additional purchases beyond the original commitment - the average purchases per week have been moving lower, down to $14 Billion per week so far in November (see chart ).
Why is this important? Because home loan rates are based on MBS - so when the Fed agreed to be a big buyer, it helped provide a market and helped keep MBS prices high and home loan rates low. So as the Fed's program wraps up and eventually stops (and/or inflation raises its ugly head), home loan rates are quite likely to be on the rise. So while rates are still very good, they may not be for long. Tick-tock.
Why is this important? Because home loan rates are based on MBS - so when the Fed agreed to be a big buyer, it helped provide a market and helped keep MBS prices high and home loan rates low. So as the Fed's program wraps up and eventually stops (and/or inflation raises its ugly head), home loan rates are quite likely to be on the rise. So while rates are still very good, they may not be for long. Tick-tock.
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