Interest rates have been held down due to the Federal Reserve’s program of buying mortgage backed securities from Fannie Mae, Freddie Mac and others. The Fed’s program comes to an end in March of 2010.
When private investors begin purchasing these mortgage backed securities they will expect a higher rate of return on their investment than what the Fed was willing to accept. This will drive interest rates up as lenders try to satisfy the demands of the purchasers of these securities.
Amy Crews Cutts, deputy chief economist at Freddie Mac expects 30 year fixed rates to hit 6 percent in 2010.
