Fed Slows Bond Purchases and Rates DROP!
For almost 5 long years the Federal Reserve has been buying various debt of the United States; over 3 trillion dollars worth with the intent of keeping interest rates at artificially low levels. And it is a program that has work as designed as we saw average overnight rates on a 30 year fixed mortgage drop to new historic lows during this period. Rates hovered in the mid to high 3% levels for a long time before jumping about a point when the Fed announced their intent last year to taper back on their debt purchases.
After delays and other changes the Fed actually did start the tapering the first of the year with a pull back in monthly purchases from 85 billion to 75 trillion.
One would expect that pulling in the reins on a program designed to keep rates artificially low would cause rates to move higher but over the first three weeks of the reduced purchases rates have in fact been down each and every week. This week they dropped a rather significant 12 basis points to 4.42% and the lowest rates we have seen in 7 weeks.
Keep an eye on the money as nothing has more of an effect on the real estate market that interest rates and as the market has cooled it is nice to see rates behaving to our liking!