From Barry Habib at Mortgage Success Source
“So the Fed stopped buying Mortgage Backed Securities, and people are wondering if this will affect mortgage rates.
There's been plenty of whistling past the graveyard, guesswork and denial, where so-called experts have been trying to tell us that there will be minimal - if any - change to rates.
That pipe dream is just nonsense.
During the past fifteen months, the Fed purchased $1.25 Trillion in MBS, which represented 80% of the mortgage market.
Prior to this program, mortgage rates were above 6%.
Now that the Fed program has ended, it's reasonable to assume that mortgage rates will rise back towards those levels…
“Additionally - sovereign debt has come into question.
Downgrades in the sovereign debt of both Greece and Portugal are a warning to the US that the same can happen here, which would drive the cost of borrowing much higher.
Our government currently spends $1.49 for each $1.00 it brings in.
Our debt is now 57% of GDP...and rising.
Does anyone really believe that Treasury yields are headed lower?
As Treasury yields move higher from their current levels, mortgage backed security coupon yields will also need to move higher in order for investors to want to purchase them.
“When all the factors are considered - the chances of higher interest rates are a virtual lock.
And anyone in the market to borrow should consider acting sooner rather than later.
With such low rates still in our hands...and all these various factors pointing at the inevitable fact of rates moving higher.”
Barry Habib, Mortgage Success Source