Interest rates climb for the third week in a row and the average 30 year mortgage is still attractive for home buyers at 5.03%. The Federal Reserve has pumped $1.25 trillion on mortgage-backed securities in an effort to lower rates on mortgages and loosen credit. And, slowly, Wall Street is retaking it’s place in the credit markets. The volume of mortgage securities, the largest segment of the credit market, is on track this year to nearly match the peak levels of 2005. “The core consumer finance sectors seem to be reasonably intact,” says Joseph R. Mason, a finance professor at Louisiana State University.
However, this year government-backed loans have accounted for 99% of mortgage securities. The breakdown between the government and private equity has been more like 80/20 in the past. “The government is literally plowing trillions of dollars into the U.S. mortgage market to keep it afloat,” says Guy D. Cecala, publisher of Inside Mortgage Finance. The Fed has said it intends to quit buying mortgage securities by the end of March.
