The record low rates that we have experienced this year are thanks to the Fed’s program to purchase mortgage backed securities. This program, which began back in January, is set to expire at the end of March. The latest data shows that the Fed has about $163 BILLION left for this program. Simple math tells us that that averages out to $11.5 BILLION dollars per week from now until March 31. The reason that I highlight this today is because the Fed has been spending over $18 BILLION per week over the most recent 3 months. Common sense tells us that the Fed will start purchasing fewer mortgage backed securities over the next 3 months. The result will be higher mortgage interest rates. Please make sure that your buyers are aware of these facts.
Just to keep in the “Grinch” spirit, I also want to make you aware of some rumblings going around concerning FHA loans. These “rumblings” started because HUD—the department that controls FHA loans—is seeing its reserves dwindle as a result of foreclosures and increased demand for FHA loans. Changes that could be coming to FHA loans are the following:
Raising the minimum down payment to 5%
Raising the up-front mortgage insurance premium
Raising the minimum FICO requirements
Will this happen? I do not know. What I do know is that buyers should not wait and see. Now is the time.
Sorry for all of the negativity this morning, but the good news is that interest rates are still very, very low.
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