What does the Federal Reserve’s third round of quantitative easing (“QE3”), launched last fall, mean for mortgage markets?

Well, in just the last week alone, the Fed bought up $13.3 billion in agency mortgage-backed securities. That’s nothing unusual — the Fed’s target is to buy up $40 billion in MBS a month, and to keep up that pace it purchased $16.9 billion the week before that, Reuters reports.

The Fed’s purchases provide price support for MBS, which fund about 90 percent of U.S. mortgages. Since bond prices and yields move in opposite directions, the result is lower mortgage rates. But when the time comes to wind down QE3, MBS investors don’t want to be left holding the bag.

Mortgage rates began to climb in May after the Fed signaled that if the economy keeps improving, it was prepared to start tapering QE3, which also includes $45 billion in monthly purchases of long-term Treasurys.

Fed Chairman Ben Bernanke’s comments Wednesday that he thinks “a highly accommodative policy is needed for the foreseeable future” has investors thinking QE3 may have a longer life expectancy than thought. That provided support for MBS — relieving pressure on mortgage rates — and sent stock prices soaring today.

But it’s only a question of when, not if, QE3 will be throttled back and then shut down. Source: reuters.com.

Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription