Mortgage rates poised to jump as Fed cuts funds

The Federal Reserve is poised to turn off a major money spigot that has helped sustain the ailing real estate sector, as an extraordinary program under which the Fed has pumped $1.25 trillion into the mortgage market is slated to end March 31, 2010.

While experts agree that the Fed's exit will cause mortgage rates to rise, the big unknown is how severe the effect will be. Several financial experts have forecasted rates to climb as high as 7 percent by the end of the year. The Fed has indicated that it might resume buying mortgage-backed securities if mortgage rates spike.

What does this all mean? If you are considering purchasing a home, it would be prudent to lock in your mortgage rate as soon as possible. You can expect high volitility in the mortgage market during the spring and summer months.