On Wednesday, November 20, 2013, the Federal Reserve released the minutes of their meetings. The expert consensus is that they will wind down their bond purchasing in the “coming months”. Although several markets are supported by the Fed’s actions, interest rates are the most sensitive to the actions of the Federal Reserve. The Fed is buying approximately $85 BILLON of bonds that include mortgage backed securities. Because they are buying bonds they are keeping the rates low by keeping the demand for bonds high.
Shortly after the press release, the mortgage interest rates hit a 2 month high. It seems like that interest rates are just waiting for a reason to go up. If you look at the “Minutes of the Federal Open Market Committee” (Federal Reserve Report) they really haven’t changed their position. So, why the increase? When the tapering begins there will be less people purchasing bonds. The only way to get them to buy is to offer a higher rate.
Fast forward 24 hours.
On November 21, 2013 there was economic data that was released by MSN Money that showed a slowing in the economy. Slower manufacturing, industrial production, and the smallest increase in consumer inflation caused interest rates to slide. This article also talks about how the Federal Reserve will continue their current policy when Ms. Yellen replaces Mr. Bernake.
It looks like we have come off the lows and are heading up. Just like if this was a graph for a stock you should be buying. Now is the time to get a mortgage, either for a new home, refinance, or taking cash out. Although rates are moving all the time, there isn’t a crystal ball that is going to tell us exactly where rates will go in the future. There are some hints that we can take from all of this. If the economy improves or the Federal Reserve starts to taper, rates will go up and go up fast. To coin a football phrase “put the points on the board.” Waiting around to see where rates are going to go can cost you a lot of money and fast.