The Federal Reserve’s program to buy $1.25 trillion in mortgage-backed securities from Fannie Mae, Freddi Mac, and Ginnie Mae came to a close as of April 1, and some fear this means that mortgage rates could increase.
For the week ending April 1, Freddie Mac reported that the average 30-year fixed-rate mortgage averaged 5.08 percent. This is up from 4.99 percent from the week prior.
The mortgage-backed securities program was intended to boost the economy; no one wanted to purchase these securities because they were seen as too risky. The program did succeed in driving down mortgage interest rates during the financial crisis. Perhaps it staved off a deeper recession.
But what will happen now?
It’s a game of wait-and-see. The Los Angeles Times noted that the ending of the program “came at a delicate moment,” with housing indicators “flat to softer in recent months.” The economy will now rely on private investors to buy any mortgage-backed securities created this year. Whether these securities are deemed safer than they were a year ago remains to be seen.
And what will happen with the $1.25 trillion in mortgage-backed securities that the government now owns? The government is considering whether it can gradually sell some; others will mature or be paid off.
[...] upward trend. Last week, I wrote about the ending of the Fed’s plan to buy $1.25 trillion in mortgage-backed securities, noting that some fear mortgage rates might climb. In last week’s blog, interest rates had [...]