All good things must come to an end; especially when that good thing may or may not have been that good to begin with.
I’m talking, of course, about the Federal Reserve’s affirmation this week that it plans to go ahead and stop buying mortgage-backed securities by the end of this month.
These purchases are what have kept mortgage rates at near-record lows–currently in the 5% range for a 30 year fixed for many people.
So far, the government (taxpayers) has shelled out an estimated $1.25 Trillon on these purchases.
Some people are nervous that once the Fed stops buying up mortgage-backed securities, mortgage loan rates will inch upward to levels that might stop any budding real estate market recovery right in its tracks.
That is probably why the Fed has apparently left the door open to stepping in again and resuming the purchases if need be.
The former research director at the Federal Reserve Bank of Richmond, Martin Goodfriend, tells the New York Times the Fed is obviously experimenting:
“It would like private money to come back into the mortgage market, but if the interest-rate spread on mortgages over government securities that is needed to bring private money back is too high, it could impede the recovery of the housing market.”
The Fed actually has been easing off its purchases of late and has apparently been encouraged that mortgage loan rates have not, as yet, skyrocketed.
But what happens when it stop buying totally is anyone’s guess. You can find almost as many “experts” who fear we are facing another crisis as you will find those who think everything will be just fine with maybe just a slight uptick in mortgage rates.
That’s what I love about “experts.” — You can find one to express just about any opinion!