"Freddie Sees Mortgage Rates Hitting 6 Percent in 2010"
Washington Post (12/26/09) P. A12; ElBoghdady, Dina
As reported in the Washington Post, mortgage rates could increase to six percent by the end of 2010, or even sooner, according to Freddie Mac. (Freddie Mac is a GSE, or government sposored enterprise, that purchases mortgages on the secondary market, pools them, and then sells them as mortgage-backed securities.) Interest rates for 30 year fixed rate mortgages have been rising in recent weeks, a process that is expected to continue. The Federal Reserve has been buying mortgage-backed securities issued by firms such as Fannie Mae and Freddie Mac, which has helped keep mortgage rates at low levels, but the central bank plans to wind down the program by March. Federal Reserve economists believe that the gradual tapering of purchases will draw private investors back to the market for the mortgage-backed securites and moderate the pressure on rate increases. However, according to the Post, Amy Crews Cutts, deputy chief economist at Freddie Mac, believes private investors will require a higher rate of return on the securities than the Fed has been willing to accept, and, as a result, mortgage originators may have to raise the rates they charge to consumers. "Anything we get at or below 5 percent is a gift at this point," says Crews Cutts.
(An aside: I found the name Crews Cutts so unlikely that I took the time to use Google to confirm that, yes indeed, that is her name.)
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