LIKE LOW RATES? TIME TO BUY IS NIGH

Since the beginning of 2009, the Federal Reserve allocated $1.25 Trillion to purchase Mortgage Back Securities. This buying power has been one of the single largest reasons that interest rates have stayed so low. Through the end of the year, they have spent $1.11 Trillion, leaving $140 Billion remaining to be spent through the end of March 2010, which is when they have said their buying program will expire. The end of the buying spree will likely put upward pressure on rates as a large institutional buyer (the Fed) will be out of the market. Yields most likely will have to rise (rising rates) to lure other buyers in.

The National Association of Business Economists (NABE) said in an article on Nov 23rd that they expect companies to begin adding jobs in this first quarter of 2010 (Yeah!). Many experts predict that the return of jobs is an integral cog in the country’s economic recovery. If that's the case, as the jobs return, the economy will begin to recover in earnest, which will raise consumer confidence but will also most likely lead to higher rates, as the Federal Reserve sees opportunities to raise the Federal Funds Rate (the rate by which banks lend to each other).

As consumer confidence grows, this will increase the velocity of money (a good thing for a recovering economy) as consumers and businesses feel more comfortable spending and banks feel more comfortable lending. This will also, most likely, cause some form of inflationary pressures and, once again, upward pressure on interest rates.

There will most likely be a window of opportunity as jobs and confidence begin to return, while rates continue to stay relatively low. As a result, this will be a good time to be poised to buy or sell.