What drives mortgage interest rates?

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5th Nov 2009 by Burt Carlson

The simple answer is that mortgage rates are driven by the market for Mortgage Backed Securities (MBS) and government Treasuries. For example, the Federal Reserve (Fed) has been buying MBS to keep rates low to aid the housing recovery. In addition the Fed has been buying Treasuries which also helps keep rates low. Since the Fed has been making these purchases rates have been around 5% for most of 2009. Now that the Fed is close to ending it purchases look for rates to inch upwards going forward. Generally speaking when there is good economic news or activity rates move up and vice versa. As the Fed support of rates ends look for rates to be driven by market conditions such as the stock market, commodities, demand for government bonds and treasuries, jobs and so forth.

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5th Nov 2009 In Investing 1 Answers | 543 Views

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