Fed MBS Purchase Program 92% Complete – Higher Rates Ahead?

The Federal Reserve Bank of Atlanta reported as of Jan. 13 that it had completed $1.14 trillion, or 91%, of its planned $1.25 trillion MBS purchases. Per a separate update from the Federal Reserve Bank of New York  another $12 billion was purchased last week, bringing the total to $1.15 trillion, or 92% of the total commitment.  As planned, the program is set to reach its goal by the end of Q1. 

So what’s the big deal?  Well, the wind-down of this plan will show us just how effective the Obama Administration and Fed was at creating stability in the housing market.  Unless we see continued commitment towards MBS purchases after this date (doubtful though not impossible) my prediction is that mortgage rates will rise nearly half a point and, together with expiration of the Homebuyer Tax Credit, will lead to further deterioration in the housing market.

Here are the links to the Fed data: 

http://www.frbatlanta.org/documents/research/highlights/finhighlights/FH_012010.pdf 

http://www.newyorkfed.org/markets/mbs/