Expert says mortgages won’t spike as expected - Metro US

Expert says mortgages won’t spike as expected

Investor demand for mortgage-backed securities will keep U.S. home-loan rates down after the Federal Reserve ended its purchases of the debt, said Pacific Investment Management Co., manager of the world’s biggest bond fund.

The Fed’s unprecedented program to buy $1.25 trillion of the securities that guide home-loan costs stopped U.S. housing prices from falling, Scott Simon, who is in charge of investing in the notes at Pimco, wrote on the company’s Web site. Pimco is among the fund companies that sold mortgage bonds to the Fed, and many money managers began 2010 “underweight” these assets, the report said.

“If and when we see mortgages cheapen, we expect to see private institutions stepping in to buy,” Simon said. “Lower- priced homes bottomed last year. Higher-priced homes should bottom later this year.”

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