What is going on with mortgage rates? After several months of mortgage rate increases last week mortgage rates suddenly decided to drop somewhat. This was a little surprising even to salty old veterans like me. With a little investigation it turns out that there are two main underlying factors: First, the Federal Reserve decided in their last meeting to stand pat in their purchase of treasury bonds in support of keeping rates low. This is called quantitative easement (QE) and has been going on for several years in an effort to keep rates low. Rates had started to climb a few months ago in anticipation that the QE being orchestrated by the FED would stop. When the FED indicated it was going to continue QE, the market reacted and rates came down somewhat. Second, Larry Summers withdrew his name for consideration as the next Federal Reserve Chairman. Summers was viewed as more skeptical of the quantitative easing than Janet Yellen, who is more or less a lock for the nomination now and considered more positive toward the policy of the Fed buying bonds to prop up the bond market. These two factors have caused the bond price to go up which makes rates go down. Will this be a long term thing? Hardly, QE can’t continue forever so eventually rates will go up again to where the market would be without FED stimulation. The long and short; take advantage of this short lived reprieve and reduction in mortgage rates. David Bastian Liberty Bank
Posted on: Thu, 26 Sep 2013 17:03:50 +0000
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