Mortgage Rates Rise on Potential Monetary Policy Shifts
Mortgage rates rose over the last seven days as markets geared up for potential announcements from the Federal Reserve later this week.
Rates have spent the last several days flat as the idea of a forthcoming tightening of monetary policy – something that was once considered imminent – was offset by new risks caused by the Delta variant of COVID-19 and signs of waning economic growth and consumer sentiment. But while these recent risks and developments are showing few signs of abating, some investors are still hedging their bets in the days leading up to the Fed’s Jackson Hole symposium on Friday. At the event, some expect Chair Jerome Powell to suggest that the central bank will shift to tighter monetary policy – by tapering their program of asset purchases — later this year. While upward movement of bond yields and the mortgage rates they influence will continue to be limited by rising COVID cases, more definitive insight regarding the Fed’s inevitable plans to tighten monetary policy should result in a meaningful increase in rates, depending on how surprising Chair Powell’s announcement is.
That said, should the Fed stop short of announcing plans to taper, mortgage rates would likely revert to recent lows.
