First, huge tax incentives are about to expire. April 30, 2010 is the last day to enter into a home purchase contract and still potentially qualify for a federal income tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for repeat homebuyers. The credit can be claimed only on contracts that close by June 30, 2010.
Secondly, another form of stimulus will soon disappear, as the Federal Reserve winds down a program that has been keeping home loan rates artificially low. The fact is that the lowest rates of 2009 were driven down to their attractive levels because of the Fed's Mortgage Backed Securities (MBS) purchase program. The Fed has already used over 80% of the allocated funds for MBS, meaning less than 20% remains to be used over four months.
As the Fed's program winds down and ends, we'll likely see two things happen. First, we will probably see higher levels of volatility-with rates sometimes shifting dramatically in the middle of the day. Second, since MBS will have less support from the Fed, rates are likely to rise over time.
Jeremy S Allen Sr. Mortgage Consultant Envoy Mortgage Phone: (603) 749-5626 Fax: 603 749-7070 jallen@envoymtg.com
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