Mortgage interest rates are likely to ________ if the mortgage market becomes privatized,and they are likely to ________ if the Fed reduces its holdings of mortgage-backed securities over time.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

Privatization of the mortgage market could lead to higher interest rates due to decreased government support and increased risk for lenders. Similarly, if the Fed reduces its holdings of mortgage-backed securities, it would likely lead to a decrease in demand for these securities, increasing interest rates as a result.

Mortgage Interest Rates Are Likely to ________ If the Mortgage