When This Chart Gets to $1,250,000,000,000 – Mortgage Rates Are Going to Go Up….

So what does this chart represent?   The Fed’s purchase of mortgage backed securities.   They committed last spring to spending $1.25 Trillion worth of our money buying mortgage backed securities and originally planned on doing it by November.    They then decided to “ease” out of things and take until March to do it.

Rates at that point dropped by .375% overnight and have since dropped further.    I’ve read a variety of analysts predictions that rates will go up by anywhere from .25 to 1.25% when the Fed steps out of the market.   My personal opinion is that we aren’t going to see a dramatic reversal, but rather a slow increase once it becomes evidence that they aren’t going to extend it out further than they already have.

Tomorrow’s Federal Reserve Open Market Committee meeting (which is held behind closed doors) will potentially give some insight into the question of whether, how long, how far they might extend or shorten their market stimulus.   My prediction is that we won’t see them make any dramatic moves but reaffirm that they’ll be done in March.    I also don’t anticipate we’ll see the effects of the market dealing with a huge buyer leaving the marketplace until well after the New Year when we get closer to them really being finished.

Stay tuned and if I can help, let me know.

Tom Vanderwell