Fed to Stop Buying Mortgage Bonds – What’s Next For Rates?
Author bio section
I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.
In a momentous decision Federal Reserve (called Fed in short) decided to stop buying mortgage and treasury bonds. After 6 years of doing so, Fed finally decided its time to put a stop on it.
So, how does it impact mortgage rates?
But, before that – lets get a little bit of History – shall we?
In October 2008, Fed decided to do something it had never done before. They announced that they would go into the market and buy a ton of bonds.
They wanted to drive the mortgage rates down, which would help the homeowners refinance and save some money. The saved money, it was assumed, would be used in buying other goods which will help boost the economy. The lower rate was also expected to spur home buying and get real estate market back on track.
It wasn’t a big surprise that they finally decided to wind down the bond purchase program. However, it does end a very interesting and “one-of-a-kind” chapter in the history of Federal reserve and US economy.
Get a live rate quote customized to your situation
The Reason Behind the Decision:
The Fed believes that economy is getting better. The people who are actively looking for jobs are finding them more easily and the companies are spending more.
Though, they are not that bullish yet on housing recovery (if only they lived in Silicon Valley).
Impact on Mortgage Rates:
While Fed doesn’t directly control mortgage rates, buying mortgage bonds was a sure shot way to drive the mortgage rates down. However, the yields on mortgage bonds are also heavily impacted by economic and political situation in the US and all around the Globe.
Bad news on those fronts is usually good news for mortgage rates i.e. they trend lower.
With bond purchase out of the equation, I expect rates to move up albeit gradually. Do not expect anything dramatic. So, I still don’t see the rates crossing 5% on an average 30 year fixed loan anytime soon.
If you were thinking of refinancing or buying a home, my advice will be to do that sooner than later. Yes, the rate increase in near future may not be substantial; but a higher rate is still a higher rate.
So, get one of the lowest rates in history while you can. Click here to get a live rate quote.
Related Posts
- 92Mortgage rates went from ridiculously low to not-so-bad in just over a week. Everything that the media thinks should have happened to keep it at the ridiculously low level did happen. Fed cut rates by half a percent. Treasurys tumbled to levels never seen before and the stock market crashed…
- 88
Shopping for a good mortgage rate can sound and feel intimidating because of the many avenues you can take to find the mortgage of your dreams. A mortgage is often a long-term loan designed for homebuyers to purchase a home while making monthly payments. The mortgage is the best tool… - 81Mortgage Rates made the biggest one week jump this year and is now at the highest level in over 4 months. As part of Primary Mortgage Market Survey (PMMS), Freddie Mac reported that the 30 Year Fixed rate is now at the highest levels since May 1, 2014. Based on the…
- 73Growing concerns about weak economic growth and Fed's indication of delaying rate hikes, plummeted the mortgage rates to the lowest levels in 16 months. Mortgage Banker's Association (MBA) reported the decline in rates across the board in its latest weekly mortgage applications survey released today. See the results below. The…
- 73
The financial industry is leaning toward democratization more and more every year. From decentralized finance to online-only banks that provide all of the financial services of a traditional bank branch, consumers have more options than ever before. One of the barriers many consumers had in the past was the digital…
