Record low rates started their move higher in early May because of talk about Fed taper. Fed taper is simply the reduction of quantitative easing and quantitative easing is when the Federal Reserve buys bonds to lower rates thus helping the economy. Originally the fed was only buying treasury bonds but more recently the fed has been directly buying MBS bonds or mortgage securities to help bring down mortgage rates and help housing prices. Tomorrow the Federal Reserve will actually announce if they will actually begin the ever anticipated tapper and how much that tapper will be. Currently the Fed is buying $85 billion dollars worth of bonds a month and the wall street consensus is that purchases will be reduced by $10 billion to $75 billion a month. Yet I have also heard that with the reduction the Fed may increase MBS purchases thus keeping mortgage rates lower. Finally the last employment report has others thinking that the Fed will not begin the Taper until employment gets better. I consider tomorrow a volatility day as I have no clear knowledge of which way rates will go. So if you haven’t refinanced in the last two years please give us a call today to see if you should lock into today’s rates before the Fed’s announcement.
1 Year chart 10 year Treasury