If and when the Fed program does end, mortgage rates will rise – but not by much. The Fed’s intervention is worth upwards of 75 basis points for a conforming loan, says Keith Gumbinger, a vice president at HSH Associates. Without its purchases, that rate might rise to 5.75% or so.
Borrowers should plan for rates to run in the mid-5% range once the program comes to an end. After that, any shift depends on whether the economy has gained more traction and if the job market is improving. Otherwise, rates don’t have the space to push higher, Gumbinger says.
The outlook for late 2010: “You’ll probably see us moving closer to the 6% range if our forecast works out,” Gumbinger says. “Those are still very favorable interest rates. Anything below 6% is a really extraordinary rate.”
