Last week, Federal Reserve Board Chairman Bernanke startled many by announcing that the Fed will not wind down their bond buying program right now.
As I have written in the past, the program is part of an overall stimulus package geared at bringing back the national economy. The Fed’s purchase of these bonds over the last few years has driven mortgage rates to historic lows. The assumption that there would be a reduction in bond purchases has caused 30 year mortgage rates to spike upward over the last few months.
Surprisingly, last week Bernanke revealed that the Fed will continue bond purchasers at the current pace. What happened and what does it mean to mortgage interest rates?
What would have happened if they reduced bond purchases?
According to Bankrate.com:
“The Fed could have caused rates to shoot up this week if it had announced the tapering of its bond-purchasing program.”
Why did the Fed decide not to start winding down bond purchases?
Moody’s Analytics reported that there were three reasons:
- Subpar economic data
- Tighter financial conditions
- Uncertainty surrounding fiscal policy
Tomorrow: What does this mean to a buyer applying for a mortgage?
Whatever the Fed does, you can save with our Lender Fee Waiver: Save $959 on lender fees. We credit the Application Fee ($460) and Underwriting Fee ($499) at closing. Applies to purchase and refinance loans of $150,000 or more closed by our Santa Fe office. Limited time offer.
Get your loans for refinances and purchases now while we have extra time to take advantage of the lower rates!
Francis Phillips is the sole author of the content and any opinions expressed in the newsletter are not necessarily those of FCLS, FCB, its owners, officers and employees. This email is meant for informational purposes only, and is not a substitute for financial planning, investment or legal advice.