Well...The Fed met on the 27th and did announce it did not have plans to expand, or extend, their mortgage bond purchase program. This means the Fed will not be a mortgage bond buyer after March 31st. You may think...big deal! Well, you would be right...it will be a BIG DEAL. The Fed has acted as a major buyer of mortgage bonds for the past 13 months. Buyer is another word for DEMAND in economic terms. If you have taken an Economics 101 class you will remember when demand goes down and supply stays the same prices will down. Price, as it relates to bonds, works inversly with interest rates. So when the bond price falls the rate goes up. So when the Fed (Demand) stops buying prices should fall and thus rates go up. This will happen over the month of March in anticipation of this move, but you can certianly expect rates on April 1st to be much higher than the 4.75%-5% rates we have come use to seeing....and that is not an April Fools joke.
Have a great weekend. Please call if you have found a house and want to talk about loan options or if you havent refinanced and you may want to do something before the rates go up.
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