The Federal Reserve’s pledge to stop buying mortgages by the end of March is sparking fears among home builders, mortgage investors and even some Fed officials that mortgage rates could rise and knock the fragile housing recovery off course, the  Wall Street Journal  reported today. Rates on 30-year fixed-rate mortgages have risen by a quarter of a percentage point in the past month to around 5.2 percent, according to HSH Associates, near their highest levels since September as the bond market has pushed up long-term interest rates amid signs of an improving economy. The recent rise in mortgage rates could be a prelude to even bigger increases in coming months as the Fed steps away from support for the market. That prospect has some in the markets counting on the Fed to change course and keep buying past March, which many officials are reluctant to do. The Fed now holds $909 billion of mortgage-backed securities. In the past year it has purchased 73% of the mortgages that government-backed Fannie Mae, Freddie Mac and Ginnie Mae have turned into securities. Purchases by the Treasury pushed total government purchases above $1 trillion. The Fed says it plans to top off its purchases at $1.25 trillion by the end of March, but must decide in the months ahead whether the economy is strong enough to stick with that plan.

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