Many mortgage watchers expect mortgage rates to maintain today's lows indefinitely. After all, the Federal Reserve has stated it will continue to buy $40 billion in mortgage-backed securities and $45 billion of longer-term Treasury securities each month (known as quantitative easing) for as long as it takes for the unemployment rate to fall to 6.5%.

But that commitment might be less firm than initially believed. The Fed recently clarified that its unemployment target isn't necessarily a specific number. In addition, a growing number of Fed governors are concerned over market risks associated with the Fed's asset purchases, which could lead the Fed to taper or end quantitative easing sooner than some economists expect.

These factors (along with a few others) have prompted Goldman Sachs to raise its yield expectation for the 10-year Treasury note – a good proxy for 30-year fixed rate mortgages – to the 2.25%-to-2.5% range this year.

Historically, the 30-year loan rate has averaged roughly two percentage points more than the 10-year Treasury note yield. The note currently yields around 2%. In other words, it's quite possible we could be looking at lending rates half-a-percentage point higher than today's rates by year's end.

 Courtesy of Jessica Regan.

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