With the Fed announcing the end of QE, the next concern is when they will start raising rates. Mortgage rates are only indirectly tied to any move the Fed might make – which usually means that mortgage rates will start inching up in advance.
Here is a quote from Capital Economics about their expectations:
http://www.housingwire.com/articles/31887-qe3-ends-how-long-until-interest-rates-rise
Unexpectedly, the Fed still thinks it will be a “considerable time” before it begins to raise interest rates. Indeed, the Zero Interest Rate Policy remains in full force, as it has been since inception at the end of 2008.
“We didn’t expect that language to be dropped at this meeting given there is no scheduled press conference, but we wouldn’t be surprised if it is changed at the upcoming December meeting,” Capital Economics said. “Overall, we still believe that the Fed will begin to raise rates sooner than generally expected, with a March 2015 hike the most likely outcome.”
If the Fed adjusts their statement in December, expect mortgage rates to get a jump on any potential rate increase. Buyers have been cautious for months, and we will probably see a couple more negative readings of the local Case-Shiller Index by next year.
If mortgage rates bump back above 4%, and maybe into the mid-4%s, they won’t kill the 2015 market. But if you are thinking of selling your house after another 5% to 10% increase in value, you might be in for a long wait.
When stocks show signs of crashing like a couple weeks ago, will the FED announce more money printing to buy bonds and thus keep rates low?
One economist thinks the stock market lives and dies by QE.
Can the economy really stay afloat on its own? Seems like the money printing helps people with assets such as homes and stocks but hurts seniors, savers and the poor by debasement.
Mortgage rates would not be so low if the FED hadn’t been buying bonds, bidding up price and thus lower yields. They now have about 14% of the total govt debt.
Who is gonna step up to the plate and buy bonds at these low yields if the FED isnt?
One article I recently saw showed that each year about 7-8 trillion in treasuries actually come up for maturity. Since there isn’t any money to pay them outright new treasuries are sold to pay off the old.So each year trillions in treasuries have to be sold by the treasury. If interest rates went up substantially the cost to service the debt could skyrocket.
Do you want to buy a bond yielding less than inflation?
We’ll see, but last time they ended a QE, rates went down.
Steady as she goes, so far:
http://finance.yahoo.com/bonds
Meanwhile in London………….Imagine paying the PITI on this!
http://www.telegraph.co.uk/finance/personalfinance/houseprices/11196451/Britains-most-expensive-garage-sold-for-550000.html
And Jim keeps on showing us the deluxe California homes to make us jealous!