Yesterday was a pretty ugly day in the mortgage markets. Mortgage interest rates spiked aggressively after the Federal Reserve released the minutes from its most recent Federal Open Market Committee meeting on March 13.
In today’s volatile economic environment, it’s not unusual to see aggressive rate spikes and drops, but yesterday was particularly notable because it demonstrates that mortgage rates are tied very closely to expectations of intervention in the markets by the Federal Reserve. Absent Fed intervention, rates probably would be significantly higher than they are right now.
QE3 On Hold For Now
The Federal Open Market Committee (FOMC), a committee within the Federal Reserve, manages the nation’s open market operations (the buying and selling of United States Treasury securities) and makes key decisions that impact interest rates. FOMC meeting minutes are closely monitored by Wall Street because Federal Reserve policy has a big impact on the financial markets.
Wall Street was expecting the Federal Reserve to engage in another round of quantitative easing (bond purchases designed to keep rates down) to stimulate the housing market, but the FOMC minutes show it’s not such a sure deal anymore. The economy has been showing signs of improvement so the Federal Reserve will adopt a policy of “wait and see” for now.
The Low Rate Party Can End at Any Time
Though 30-year fixed mortgage rates have been hovering around or just below 4% for a few months now, yesterday’s rate spike is a warning on how quickly the party can end. Absent the Fed’s heavy hand in the market, mortgage rates would probably be much higher than they are right now.
If you haven’t yet taken advantage of today’s incredible mortgage rates, it’s time to get your mortgage refinanced. There’s no telling when these rates will be gone for good.