Mortgage rates may spike on Fed uncertainty

Uncertainty about the future of the Federal Reserve’s massive program to keep interest rates low could spook investors and send mortgage rates higher.

Testifying before lawmakers today, Fed Chairman Ben Bernanke said he couldn’t rule out cutting back on the Fed’s “quantitative easing” — purchases of Treasurys and mortgage-backed securities (MBS) — in the months ahead. That sent prices of MBS backed by Fannie Mae and Freddie Mac into a tailspin, the Wall Street Journal reports.

Since MBS prices and yields move in the opposite direction — and since changes in MBS yields are eventually reflected in mortgage rates paid by consumers —  the cost of taking out a home loan could rise in the days, weeks and months ahead. Source: wsj.com.