It is said all good things must come to an end. While this may not be true in all areas, with phenomenally low interest rates, it is true. Mortgage rates have been artificially low for the last twelve months, thanks to support from the Federal Reserve and U.S Treasury.

Last November, liquidity in the financial markets nearly evaporated in many respects, leaving mortgage companies with few buyers of mortgage backed securities (MBS). On many days the interest rate for a 30-year fixed rate mortgage was at or above 7.00% for a zero point loan depending on the lender.

The Federal Reserve announced a program where they would purchase $1.25 trillion of MBS on 11/28/08, causing mortgage rates to plummet. This program is scheduled to end in March, 2010 and the ultimate impact on interest rates is unknown. However, you can expect that rates will return to “normal” at some time in the future.

While it is not expected that rates will return to the average rate since 1971, a throat grabbing rate of 9.00%, many lenders are currently debating business plans for rates potentially increasing significantly from current levels next year.