QUERIN LAW: The Fed And Mortgage Interest Rates Fall 2013

FAQs PicIn an article posted at the online MReport, here, they noted the continued jump in fixed term interest rates this week.

According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 4.58 percent (0.8 point) for the week ending August 22, up from last week’s 4.40 percent. A year ago at this time, the 30-year FRM averaged 3.66 percent.

The reason?  The credit markets and the stock market are schizophrenic. One day it’s sunshine and roses, the next day it’s gloom and doom. Right now, attention is focused on the Fed, and whether it will taper off of its $85 billion monthly bond purchasing program (called “Quantitative Easing” since that’s the term they thought would make it appear as if it was a well-recognized principal of economics, rather than a Hail Mary Pass).

I’ve explained the Fed program here.  Bottom line is that investors chasing returns knew they couldn’t get it in treasury bills, so they flooded the stock market.  Then on June 19, 2013, when the Fed “suggested” it might slow down its bond buying,  investors dumped their stocks and ran to treasuries.  The stock market tanked and interest rates have climbed in T-bills, causing fixed term rates to increase for mortgage loans.

It is expected the Fed will knock $10 – $20 billion off its bond purchases this Fall.  It remains to be seen how the markets will react – i.e. like adults, or Chicken Little.  Tip: If you’re getting a mortgage loan anytime soon, consider buying down the rate and locking it for enough time to close. ~ PCQ