Fed Can’t Keep Rates Low Forever

Mortgage rates inched up this week after the Fed signaled to investors that it won’t buy more bonds to provide further stimulus to the U.S. economy.

The Fed has helped to keep mortgage rates artificially low through its continuous purchase of government and mortgage bonds, which is a policy known as quantitative easing.

Many investors hoped the Fed would add another round of stimulus, but most Fed members lean away from that idea and seem ready to let the U.S. economy stand on its own. At least, that is the message investors got Tuesday, after the minutes from the last Federal Open Committee Meeting were released. “The U.S. government can’t buy its own debt forever,” says Brett Sinnott of CMG Mortgage in San Ramon, Calif.

What does that mean for borrowers? It means rates won’t stay low forever. Rates started to climb as soon as the FOMC minutes came out Tuesday afternoon, but they adjusted down a little after Spain’s troubled bond market made the headlines Wednesday morning.

The consensus in the mortgage industry is that rates will climb from their lows by the end of the year.

RATEFORECAST
April 6th, 2012

Will rates rise or remain relatively unchanged this week?
Industry experts and analysts provide their insights.
·       14% of respondents expect rates to fall in the coming weeks
·       72% predict a further increase in mortgage rates while the remaining
·       14% forecast that mortgage rates will remain more or less unchanged

 

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