Federal Reserve Bond Buying Program Predictions Explained By LoanLove.com

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LoanLove.com comments on recent speculation about the Fed’s buyback program and how its eventual tapering will affect mortgage borrowers.

LoanLove.com is a borrower advice website that focuses on providing borrowers with all that they will need to find a loan that they will love via in-depth information that is provided in a concise, easy to understand and even entertaining way that both new loan borrowers and experienced home owners will be able to benefit from. As a trusted destination for current news and expert advice, the website is constantly updated to keep abreast of any new developments that could affect home buyers and owners. Now, as the mortgage market holds its breath to see how the Fed will decide on the bonds purchase program tapering issue, Loan Love explains how this will affect borrowers in a video discussing Federal Reserve bond buying program predictions.

The Fed is due to meet this December 18th and many believe that they will likely decide on whether to taper at that time based on data from the NFP report released this Friday. A Mortgage News Daily report posted on November 29th says, “Investors increasingly believe the Fed may move to reduce asset purchases in December if the upcoming jobs report is strong enough, though a great deal of debate remains. If that happens, it would likely result in an immediate move higher for rates--perhaps significantly. Investors will draw conclusions about the Fed decision almost immediately on Friday and may begin leaning in one direction several days in advance. The point is that we're going from what has been a very flat few weeks to a potentially much more volatile December.”

Loan Love has explained why this decision is so important in a previously posted video. This video says, “The Federal Reserve has been buying bonds for a while now -- since the beginning of 2013, it's been buying $85 BILLION of mortgage - backed securities -- bonds -- EVERY MONTH. Before that, it had been buying $40 billion per month. That helped inspire consumer confidence and keep bond rates high. The Fed's program also helped keep bond rates high. Now, mortgage interest rates and bond rates are inversely proportional; that means when one goes up -- the other goes down. So, since bond rates were going up while the Fed was in the middle of its bond-buying program, it stands to reason that mortgage rates were going down during the same time. Now that the Fed has announced it's going to stop buying bonds, bond rates have begun to fall and -- yep, you guessed it -- mortgage rates have begun to rise.”

However, as Loan Love states in an article posted on their website, the Fed’s tapering really is not as bad as many might think. That article states, “The key thing to remember: The record-low mortgage rates of days past were artificial, propped in place by the Fed. Once the Fed buyback program ends, rates will return to normal levels. So rather than thinking of it as some prediction of doom and gloom, consider it a rate adjustment that was bound to occur sooner or later. The moral of this story for potential homebuyers: Lock in your rates now as a hedge against rising rates in the future.”

For more information, click here to view the video or visit LoanLove.com to read more about the Federal Reserve Bond Buying Program.

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Kevin Blue
Loan Love
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