Will the mortgage rates rise if FED stops buying the mortgages? I heard that is going to happen in APR. Is that correct?

Rates have been steadily climbing over the last 2 weeks. They are not dependent on the FED but rather long term mortgage security rates and to a small degree the 10 year and 30 year treasury bond market. The FED does not directly buy mortgages. It regulates short term interest rates between the federal reserve and banks and between banks themselves. Anybody that says they know where mortgage rates are going to be in spring doesn't have a clue.

The simple answer to your question is YES. The Fed is in the process of winding down their purchases of Mortgage Backed Securities (MBS). Simply put, MBS are bonds whose collateral is a mortgage. Interest rates have an inverse relationship to MBS prices, when MBS prices increase, mortgage rates will fall and vice versa. Since January 2009 the Fed has pledged to buy $1.25 TRILLION in MBS. If you do the math, it would be an average of about $20-$25 billion per week. It is no secret that the Fed is winding down its activity in the MBS markets. They have announced and reiterated that they will stop buying MBS by the end of the 1st quarter of 2010 and their weekly purchases over the last few months have been averaging about $16 billion, significantly less than the $20-$25 billion they were averaging in the late summer.At the end of the day its Economis 101...Supply and Demand. The Fed as created an artificial demand for MBS and this has resulted in low interest rates. However, once they exit the market, the only way rates will stay at current levels is if the private sector steps in and soaks up the supply coming to market to replace the FED. There has been no indication that this will occur.Check my blog for today. There is more detail about the Fed's activity in the MBS markets.If you have any questions or would like more detail about what drives rates, please feel free to give me a call at 877-662-3321 x-102. M name is Joe Shamie.

Joe's answer is right on. The Central Bank has been buying mortgage backed securities in an effort to keep mortgage interest rates artificially low for a sustained period of time. Their goal was to buy $1.25 Trillion in mortgage backed securities by March 2010.Fed Chairman Ben Bernanke reiterated last Monday that the Fed's buying program will end in March. The Feds currently hold just over $910 Billion in mortgage backed securities.As Joe said, if the private sector (including foreign money) does not step in and buy the same volumes, we WILL see rates increase.I wrote a short blog post on this at http://usdaruralhomeloans.com