RateAPY

Mortgage Rate Support By Feds Going to Phase Out

Posted by: RateAPY Bank Rates News
November 4th, 2009

The Feds announced today that they will leave their main interest rate alone again. The Fed Funds Rate will continue to sit at zero to 0.25%. The news indicates continued extraordinary measures by the Fed to stimulate the US economy.

FOMC Decision Effects Mortgage Rates

Although the Fed Funds Rate will remain low for a period of time, the Fed confirmed that they will make moves in the direction of unwinding its artificial support of the mortgage market. Currently, the Fed is the largest purchaser of mortgage-backed securities (MBS), and its purchases have kept mortgage rates artificially low. The Fed’s announcement indicates that they will continue to provide support to mortgage lending and housing markets, with total planned purchases of $1.25 trillion in MBS in addition to $175 billion of agency debt. While these purchases are somewhat dialed back from expected numbers and are expected to wind down in the first few months of 2010, they still represent a very significant level of Fed support of credit markets.