Mortgage Rate Update September 19, 2013

Posted on by Evan in Rate Update

Mortgage rates are better across the board this morning.

The Fed surprised the markets yesterday when they announced that they would continue onward with the existing pace of quantitative easing (QE) which has the Federal Reserve purchasing $85 billion in US treasuries and mortgage-backed bonds (MBS’s).

The markets (and me) had been anticipating that the Fed would announce a plan to taper QE but the Fed decided to leave the “foot on the gas”.

Bernanke surprised the markets by announcing the Fed would leave QE in place.
Bernanke surprised the markets by announcing the Fed would leave QE in place.

In the policy statement the Fed Chairman Ben Bernanke said that the policymakers remain concerned about the strength of the recovery and therefore would leave QE in place until conditions improved.

The Fed surprised the market yesterday by keeping QE in place.

Had mortgage rates not risen by ~1% in in the past couple months I suspect the Fed would have moved forward with tapering but the markets had already pushed interest rates higher in anticipation of the announcement in effect doing the Fed’s job for them.

In housing news the National Association of Realtors released data today showing that existing home sales in August increased to the highest level since February of 2007.  Despite mortgage rates rising demand remains strong for housing.

Mortgage rates have improved by .25-.375% and the longer-term outlook has not changed.  The Fed will taper QE it is only a question of time.  Therefore, in the long-run rates will rise.  In the near-term can we expect rates to improve further?  It’s possible but at this time MBS’s are battling technical resistance.  Safe play is to lock in on these improvements.

 

Current Outlook: locking