The value of mortgage backed securities has been in a steady decline since the beginning of December and has fallen off of a cliff starting on December 18th. This fact has caused interest rates to go from the high 4s to the mid 5s. Where this will stop is all speculation.
What is not speculation is that the Fed's program to purchase mortgage backed securities is going to come to an end in three months. I read something last week that indicated that the Federal Reserve is now as much as 25% of the market for Fannie Mae, Freddie Mac, and Ginnie Mae mortgage backed securities. To put this in persepctive, one year ago the Federal Reserve was 1% of that market. WOW! This is a very big deal and is important for potential homebuyers and individuals that currently have a mortgage and have not yet taken advantage of the interest rates that we have seen this year. As I have said over and over again, now is the time.
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