NEWS

Predictions on Future Mortgage Rates

Date: Nov. 30th, 2009
Contact: SmartMoney Lisa Scherzer

What will happen to mortgage rates if the Federal Reserve stops buying mortgage-backed securities next March?

If and when that program ends, mortgage rates will rise, but most financial observers say it is very likely they won’t skyrocket.

Keith Gumbinger, a vice president at financial publishers HSH Associates, predicts that the end of Fed intervention will push rates up about three-quarters of a point for a 30-year conforming loan–somewhere in the mid-5 percent range. By late 2010, Gumbinger says the rate will be closer to 6 percent.

Michael Larson, a real estate analyst at Weiss Research, is dubious that the Fed will actually end the program. He contends that the Fed will continue buying mortgage backed-securities as long as the housing recovery is tenuous. And as long as the Fed continues to dominate that market, “we’re not really going to move the needle on rates,” Larson says.