News about Mortgage Rates
The most closely watched economic news last week was Wednesday’s Federal Reserve meeting. The Federal Open Market Committee statement was a little more upbeat about the economy than expected, as the Fed upgraded its assessment of the performance of the labor market. This was unfavorable for mortgage rates, but the reaction was small—and mortgage rates ended last week just a little higher.
As widely expected, the Fed announced that its Treasury and mortgage-backed security (MBS) purchases will conclude at the end of October. However, there was little reaction. Over the last few years, these bond purchases, described as quantitative easing, helped push mortgage rates down to the lowest levels in decades. The Fed became the eventual investor in the majority of mortgages originated during the bond purchase program. The Fed’s balance sheet expanded to roughly $4.4 trillion from less than $1.0 trillion in 2007.
The true market reaction to the end of quantitative easing took place in May of 2013 when the Fed first indicated that it was going to gradually wind down the program. That caused mortgage rates to increase from historic lows. Since the announcement, the tapering has taken place at the anticipated pace with little additional impact. At some point, though, Fed officials will begin to reduce the size of their MBS holdings. When the Fed makes that announcement, mortgage rates could be affected.
The market commentary material provided is from a third party vendor, MBSQuoteline, and is not necessarily the opinions of the sender or the organization they represent. This information is intended for educational purposes only and should not be construed as investment and/or mortgage advice.