"Originators will look to keep rates low and keep their pipelines full so long as they can do it economically," Scott Buchta, head of mortgage strategy in Chicago at Sandler O'Neill & Partners LP, said in an e-mail.
The difference between the yields on Fannie Mae's current- coupon securities and rates on 30-year loans fell last week to about 1 percentage point from more than 1.5 percentage points in February, compared with an average of about 0.6 percentage point over the last decade, according to data compiled by Bloomberg.
While the Fed has sought to lower rates to bolster a struggling property market and help the economy recover, rising borrowing costs may spur potential homeowners to buy on concern that they will move higher, First Pacific Advisors LLC's Julian Mann said.
Those individuals, who have been facing rising rents as home prices decline, "may say, 'that's it, I'm not going to wait any longer,' " Mann said today in a telephone interview. He helps oversee $5.7 billion in bonds as a vice president at Los Angeles-based First Pacific.