Over the past year, the Federal Reserves program of purchasing mortgage backed securities has been helping to keep the interest rate for 30 year mortgages down as far as below the 5% level. In fact, interest rates have just begun to creep up from their record low levels; 2009 ended with a bit of an increase on its 15 and 30 year fixed rate mortgages, but the first week of January ended with an unexpected dip in the rates before the anticipated rise is expected to continue.

Many experts are concerned that when the Federal Reserve stops buying mortgage-backed securities then the rates will rebound to the much higher rates that we had seen in previous years. This program is scheduled to cease on March 31st, 2010 unless the Federal Reserve deems it necessary to extend the program.

The Federal Reserve has, in fact, been debating extending the program; much like the government did with the Home Buyers tax credit last fall. The tax credit has been a supporting factor in the increase in housing sales over the past year and there were concerns that once it ended that the market would drop as a response. The government decided last fall to continue their tax credit program into the beginning of the year and extend it to April 2010 so that more home buyers could benefit from it and to further support the real estate sector, whose recovery supports the recovery of the economy, after all.

At this point, the Federal Reserve has decided to not extend the securities buying program past the March 31st expiry date, but not all of the members of the December Federal Reserve meeting were siding with this idea. Some members think that the terminating date is too early and may cause some serious increased in the mortgage interest rates. It is a definite possibility that with the removal of this programand the ending of the tax credit programthat increasing interest rates could squelch the current home buying and cause the market to stagnate and flood with new foreclosures with no one to buy them.

While the government is assuring lenders that with the ending of this program the market will not suffer too much due to them still offering support to Freddie Mac and Fannie Mae, many experts are not convinced. Some economists are concerned that the end of the Federal Reserve program will result in much higher interest rates and help to contribute to another dive in the housing prices across the nation.