30 Year Fixed Mortgage Rates; Lowest Interest Rates Ahead?
Posted on | October 26, 2009 | No Comments
The average for 30 year fixed mortgage rates has been right at 5% for quite some time. In fact, since the beginning of September, mortgage interest rates have bounced around 4.9% to 5.1%. The question many borrowers are asking is “are the lowest mortgage interest rates ahead of us?” No one knows the true answer to this question but with the government working very hard to keep mortgage rates low it is quite possible.
Since March 2009, President Obama and Ben Bernanke have agreed that low mortgage interest rates would help the economy. Low rates would spark interest in the housing market which is the backbone of the United States economy. If people started buying home again then we would see an uptick in the economy and foreign investors would start sinking money back into America.
So far the plan has worked out well but the future is very muddy. To keep mortgage rates low the Fed has printed money at well to purchase US Treasuries and Mortgage Backed Securities. By making these purchases, the Fed has helped to keep mortgage rates near an all time low for much of 2009. The question we must all ask is how long can they continue to do this?
The Fed has announced that they are going to stop buying US Treasuries at the end of October but they are not going to stop buying mortgage backed securities until the end of March 2010. This means that many more billions of dollars is going to be printed to keep mortgage rates low. The conundrum we are in is that treasury yields are likely to increase which is going to force the Fed to spend even more money to keep rates low.
As treasury yields increase, mortgage rates tend to follow. If the exit of purchases by the Fed causes a strong up trend in treasury yields then we are going to see a very interesting situation. If mortgage interest rates start to move up towards 6% then it is likely the Fed is going to jump in and print more money but only time will tell if that happens. As of now, it looks like low mortgage rates are still ahead of us.
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Author: Mike Garner
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