The Fed announced today that it will be easing off the gas on some of its programs that have pushed mortgage interest rates to record lows in 2009. By October the Fed will stop buying treasury bonds. This is important because buying treasury bonds kept the yields low on those bonds and that was keeping mortgage rates low. Here is an excerpt from an AP article on the subject:
The Fed said it would gradually slow the pace of its program to buy $300 billion worth of Treasury securities so that it will shut down at the end of October, a month later than previously scheduled. It has bought $253 billion of the securities so far.
The program is aimed at lowering rates on mortgages and other consumer debt, a move to spur Americans to spend more. But its effectiveness has been questioned by some on Wall Street and on Capitol Hill who worry that the program makes it look like the Fed is printing money to pay for Uncle Sam’s exploding deficits.
The minutes from the Fed’s June meeting showed officials “saw little point in extending it because a small increase in purchases would probably have little impact on yields, while a big increase might be misinterpreted as a willingness to monetize the budget deficit,” according to Capital Economics senior U.S. economist Paul Ashworth.
The upshot is this: With the Fed getting out of the business of compressing mortgage interest rates soon we will likely be seeing rates in the 6’s again. If you have been holding out waiting for rates to drop before refinancing you might want to look at contacting us now while rates are in the 5’s still. They may be back in the 6’s before we know what hit us.