Reaction to Fed Purchases of Mortgage-Backed Securities

After the Fed announced that it would expand purchases of mortgage-backed securities and Treasury securities, applications for both purchase and refinance loans jumped 32%. Last month, mortgage rates averaged around 5%, down from 5.1% in February and 6 % a year ago. Buyers continue to enjoy lower mortgage rates as weekly rates fell to 4.78 percent in the first week of April.

With rates at historic lows, uncertainty remains as to how long these low rates will last. Increasing federal deficits due to massive government spending could weaken the dollar and prod inflation, which could send interest rates back up.