Mortgage Rates Remain Steady

As has been the case all year long, mortgage rates remain low – hovering the 5% mark.  The tax credit extension, although the long term effects may be adverse, should help housing going into the first quarter of 2010.  Coupled with low interest rates, many homebuyers may never again see such an opportunity.  The big question is how long will mortgage rates be able to sustain these low levels.  With the Feds pulling out of purchasing mortgage bonds by year end, interest rates are destined to ascend.  Falling demand pushes prices lower and as we all know, as bond prices fall, interest rates rise.  There is little chance that the Feds will begin to increase interest rates in the short term, but remember, the Feds monetary policy and interest rate adjustments, do not directly coincide with mortgage rates.

Mortgage Rates

The bond chart represents mortgage back securities ( FNMA 4.5% bond ) prices over the last 6 months.  Remember, falling bond prices indicate upward pressure on mortgage interest rates.  The converse is also true – rising bond prices result in falling interest rates.

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