The Federal Reserve Board may be running into a natural barrier to its ability to bring down mortgage rates, according to analysts at UBS AG.

In a note to clients that was sent last week, the analysts wrote that lower rates induce borrowers to take out new loans, increasing the supply of new mortgage bonds and counteracting the demand created by government purchases.

The Fed announced a program to buy up to $500 billion of agency mortgage bonds in November, and it had bought $69 billion worth as of Jan. 29.

The program has had a dramatic effect, driving down the average rate on a 30-year, fixed mortgage by 108 basis points from the weekly period before its announcement to a low of 4.96% for the week that ended Jan. 15, according to a Freddie Mac survey.

The average has since drifted up to 5.10% in the week that ended Jan. 29.

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