The Federal Reserve said today it’s put an end to the final round of “quantitative easing” — massive purchases of mortgages and Treasurys intended to goose the economy by helping keep the cost of borrowing low.
The Fed’s unprecedented program — last year it was buying $85 billion a month in Treasurys and mortgages — helped bring mortgage rates to new lows for the modern era. The end of “QE” has been widely expected — the Fed’s been tapering its purchases gradually — and isn’t expected to send mortgage rates soaring, at least not for now.
For now, investors still see mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac and Ginnie Mae that fund most home loans as a safe place to park their money. And the Fed says it will keep reinvesting principal payments from its holdings of Fannie and Freddie debt and agency MBS into agency MBS.
In other words, instead of unwinding its massive $4.48 trillion holdings of Treasurys and MBS, the Fed will continue to hold them on its balance sheet — limiting the market supply of those securities, and providing continued stimulus to the economy by keeping yields low, Bloomberg reports.
But if the economic recovery picks up steam and inflation becomes a worry, it will be wise to keep an eye on mortgage rates. Source: federalreserve.gov.